US extends anti-trust probe into BAE deal to buy defence contractor

The US government has extended its review of BAE Systems' $4.2bn (£2.2bn) planned acquisition of the the country's United Defense Industries (UDI), it emerged yesterday.

The US government has extended its review of BAE Systems' $4.2bn (£2.2bn) planned acquisition of the the country's United Defense Industries (UDI), it emerged yesterday.

The antitrust investigation, by the Department of Justice, has sought more information on the deal, UDI said.

The two companies sought clearance of the transaction from the Department of Justice on 14 March but the authorities have not been able to complete their review within the normal 30 days.

BAE and UDI said: "While the companies do not know when DoJ will complete its review, they continue to anticipate the merger will be completed mid-year, as previously announced." They added that they "intend to address the [information] request promptly", without spelling out the extra detail required. Analysts said the signs so far were that the regulatory review of the deal was routine in nature and not driven by any special concerns. There is little overlap between the two companies' business.

The deal must also pass a test of its national security implications by the Committee for Foreign Investment in the US. That review will focus on the amount of UDI's classified work and the risk of technology transfer. As UDI supplies armoured vehicles not considered to employ the latest technology, this is not expected to threaten the transaction.

BAE is already Europe's biggest defence group. The rationale for the UDI deal is to boost sales in the US, the world's biggest arms market. The acquisition would be the largest of a US defence company by a foreign business and make BAE the Pentagon's sixth-largest defence contractor.

The credit ratings agency Standard & Poor's said while the UDI deal meant BAE's rating was placed on credit watch "with negative implications", its long-term corporate credit rating would be affirmed.