BAE merger plan doubts pile up
£30bn link with EADS faces political hurdles and the concerns of major shareholders
,
Russell Lynch
Tuesday 18 September 2012
Related articles
BAE Systems' £30bn merger with the European aerospace giant EADS came under further pressure yesterday, with shareholders expressing doubts about the proposed deal as governments pored over the politically sensitive details.
David Cumming, the head of equities at Standard Life Investments, which owns 0.84 per cent of BAE, warned about the political hurdles to the tie-up and criticised the company's lack of communication with shareholders to explain the attempt to create the world's largest arms company. "We are in the sceptical camp at the moment," he said.
Another top shareholder, who declined to be named, said it was "going to be tricky getting it through the various stakeholders". Saying that getting the merger approved by shareholders would be "the easiest part", he added: "There are a lot of interested parties, so it's not going to be trivial at all."
The planned merger – news of which was rushed out last week after a leak – would see EADS holding 60 per cent and BAE 40 per cent of the new company. However, it needs approval from a number of governments, including France and Germany, which each own 22.5 per cent of EADS. Spain holds 5.5 per cent.
The US government, a major BAE customer, has national security concerns, while Britain – which could block the deal with its golden share – also has worries over the security of its Trident nuclear submarine programme. It is understood BAE would make ring-fencing Trident a priority if the merger happens.
Mr Cumming told Radio 4's Today programme: "I think it is a difficult deal as you've got US concerns over defence technology leakage and you've got political issues — not just Germany and France but also the UK. There's golden shares all over the place, so we're relatively sceptical. Also, BAE has been shy in communicating the rationale for the deal to shareholders."
His comments came as the German Chancellor Angela Merkel said Berlin was "discussing and evaluating the EADS-BAE merger plans and we are in discussions with others on this". France's Finance Minister, Pierre Moscovici, said his government was "asking a lot of questions" over the deal.
The possibility of a rival bidder was highlighted by the credit agency Moody's Investors Service, which argued that news of the tie-up could flush out other rival suitors in a new round of consolidation. Russell Solomon of Moody's said: "We expect the merger talks have triggered at least consideration of a new round of business realignments within the global aerospace and defence industry." He added that "the immediate effects … could include counter-offers for BAE from other large defence contractors".
The BAE shareholder said he believed the possibility of a bidder emerging was "not inconceivable", but gave cautious support to the proposed tie-up. He added: "In an ideal world, would you have liked to have seen it approached by a US buyer at a big premium? Maybe you would, but this doesn't look like a bad deal."
EADS' shares initially slumped by 15 per cent last week after the deal was unveiled, but yesterday in Paris they rose for the second time in two days. In London, BAE fell 5p to 342p, although the shares have added more than 4 per cent since the news broke.
-
Stand by for another DECADE of wet summers, say Met Office meteorologists
-
'Jail reckless bankers': Report urges the Government to introduce new criminal offence for reckless management
-
Feat of engineering: Incredible photographs show construction beneath New York's Second Avenue
-
World news in pictures
-
Google challenges US surveillance gagging order
- 1 Diary of Second World War German teenager reveals young lives untroubled by Nazi Holocaust in wartime Berlin
- 2 'Jail reckless bankers': Report urges the Government to introduce new criminal offence for reckless management
- 3 Breaking the Silence: In the reality of occupation, there are no Palestinian civilians – only potential terrorists
- 4 Uri Geller psychic spy? The spoon-bender's secret life as a Mossad and CIA agent revealed
- 5 Vice pulls 'breathtakingly tasteless' fashion shoot glorifying the suicides of famous female authors from Sylvia Plath to Virginia Woolf
Get your summer started with British Military Fitness
BMF is the UK’s biggest and best loved outdoor fitness classes
How will you make today delicious?
Tell us how you plan to make today delicious and you could win a £50 M&S gift card.
Learn a new language
Add another string to your bow with Rosetta Stone, whether it's Spanish, Italian or Mandarin...
Making reading fun for kids
Nook is donating eReaders to volunteers at high-need schools and participating in exclusive events throughout the campaign.
Introducing the 'Get Reading' campaign
Get the latest on The Evening Standard's campaign to get London's children reading.
Enter the latest Independent competitions
Win anything from gadgets to five-star holidays on our competitions and offers page.
Business videos from commercial thought leaders
Watch the best in the business world give their insights into the world of business.
iJobs Money & Business
Fidessa Analyst / PM - Banking - London - £600pd
£550 - £600 per day: Orgtel: Fidessa Analyst / PM - Banking - London - Up to £...
Quant Analyst, Banking, London, £55-60k Per Annum
£55000 - £60000 per annum + Benefits + Pension: Orgtel: Quantitative Analyst, ...
KYC ANALYST
£150 - £250 per day: Orgtel: KYC Analyst - London - Banking - £150-250/day C...
Senior Finance Project Manager
£425 - £550 per day: Orgtel: Senior Finance Project Manager - £550 - Bristol -...
Day In a Page
First night: The Cripple of Inishmaan
Scandi-geeks descend on Nordicana for fan-convention
Female aristocrats battle to inherit the title



Comments