Taiwan ratifies BAe venture: Deal saved after Taipei agrees pounds 300m financing

BRITISH AEROSPACE'S joint venture with Taiwan to produce regional jets was saved from collapse yesterday after the Taipei government finally ratified the deal and agreed financing terms.

Taiwan's state-run Chiao Tung Bank will head a consortium to provide dollars 460m ( pounds 306m) in loans and operating funds while the government is to increase its stake in the Taiwan Aerospace Corporation, the Taiwanese partner in the venture, from 29 to 39 per cent.

BAe had threatened to pull out of the deal, an integral part of the group's pounds 1bn restructuring, if agreement on Taiwan's share of the funding was not in place by the end of the month. Confirmation that the Taiwanese government had finally ratified the deal was greeted with relief in the City, where BAe shares ended the day 13p higher at 422p.

Speaking at a news conference in Taipei, Yang Shih-chien, the vice-economics minister, said: 'Premier Lien Chan has agreed to the proposal. All relevant government agencies will help to promote the project.'

The government commitment should ease the way for private Tawainese industrial firms to inject more capital into Taiwan Aerospace, raising its capital from dollars 115m to about dollars 190m.

Under an agreement signed in January, BAe and TAC agreed to form a new company, Avro International, to manufacture BAe's range of 75 115-seater regional jets in both Britain and Taiwan. TAC also agreed to pay BAe pounds 120m for its 50 per cent stake in the new venture plus dollars 25m on delivery of the first jet to be assembled in Taiwan.

The deal is important to Taiwan's hopes of building up its fledgeling aerospace industry and to BAe's recovery strategy. Last year it set aside pounds 1bn to cover the restructuring of its regional aircraft division after a pounds 337m loss in commercial aircraft.

But final agreement had been dogged by wrangles over the level of additional financing from Taiwan. Under yesterday's agreement, Taiwan will lend Avro dollars 400m to finance an aircraft lease sales facility and dollars 60m in initial operating funds.

Mr Yang also said the Taiwan government had tentatively agreed to provide about dollars 260m to finance development of a new 120-seat regional jet, the RJX.