BAE/EADS merger under fresh scrutiny

Following recent announcements of a proposed merger between BAE Systems and EADS NV and despite the government’s initial support of the move, pressure is beginning to mount on both companies to prove that the merger will actually benefit defence business.

The planned merger will create a global aerospace and defense giant with combined sales of more than €70 billion ($90.3 billion) and more than 220,000 employees. Despite insisting that the merger is designed to benefit the industry and not cut costs, BAE and EADS in particular are eager to make the merger a reality, as BAE will be likely to receive a break from defence spending cuts, while EADS will be able to expand its presence in the market.

However, despite support in the UK in particular from Deputy Prime Minister Nick Clegg among others, some critics are unconvinced that the merger will create jobs and stimulate growth in the industry, with French media company Lagardere, stating: “Despite the industrial and strategic potential it is said to have, [the deal] has not proven so far that it would be a value creator for EADS,” concluding that “Lagardere considers that the conditions for joining EADS and BAE together are unsatisfactory at this stage.”

Given the size of the plans, that so many different groups have so many opinions is to be expected, with British, French and German governments will all seeking assurances that jobs in their own countries will not be cut or relocated elsewhere.

BAE and EADS have until 10 October to make a formal proposal for the deal.

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