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EADS-BAE Systems Tie-Up Abandoned

by Ulrika Lomas, Tax-News.com, Brussels

11 October 2012


BAE Systems and Airbus's parent company EADS officially terminated negotiations towards an amalgamation of the two businesses on October 10, 2012, stating that they were unable to receive the necessary approvals from stakeholder governments within the 30-day time frame allowed under the City Code on Takeovers and Mergers.

The two companies confirmed that during the 30-day negotiation period allowed, both companies had broadly agreed terms for the merger, including an appropriate management structure, but said that despite their best efforts they were unable to win over government support.

Confirming the end of negotiations, BAE Systems stated:

"From the outset of discussions between the parties, both BAE Systems and EADS were clear that they would proceed with a merger of their businesses only if a transaction structure could be created that aligned the interests of the parties' stakeholders and received their support. BAE Systems and EADS worked constructively to deliver such a structure."

"Notwithstanding a great deal of constructive and professional engagement with the respective governments over recent weeks, it has become clear that the interests of the parties' government stakeholders cannot be adequately reconciled with each other or with the objectives that BAE Systems and EADS established for the merger. BAE Systems and EADS have therefore decided it is in the best interests of their companies and shareholders to terminate the discussions and to continue to focus on delivering their respective strategies."

"BAE Systems and EADS believe that the merger was based on sound industrial logic. It represented a unique opportunity to create a combination from two strong and successful companies greater than the sum of the parts. The merger would have produced a combined business that would have been a technology leader and a greater force for competition and growth across both the commercial aerospace and defence sectors and which would have delivered tangible benefits to all stakeholders."

Ian King, Chief Executive of BAE Systems, said:

"We are obviously disappointed that we were unable to reach an acceptable agreement with our various government stakeholders. We believe the merger presented a unique opportunity for BAE Systems and EADS to combine two world class and complementary businesses to create a world leading aerospace, defence and security group."

"However, our business remains strong and financially robust. We continue to see opportunities across our platforms and services offerings and in the various international markets in which we operate. We remain committed to delivering total shareholder value and look to the future with confidence."

Tom Enders, Chief Executive of EADS, added:

"I'd like to thank everybody who supported us, in particular all the colleagues at BAE Systems and EADS for all their hard work and dedication to this project in recent months. A special thank-you goes to Ian King for his trust and partnership. It is, of course, a pity we didn't succeed but I'm glad we tried. I'm sure there will be other challenges we'll tackle together in the future."

The deal was reportedly scuppered by opposition from Berlin. Britain, which hosts BAE System's headquarters, had backed the deal despite earlier opposition, and France was said to have warmed to the deal as the month-long negotiations progressed. Shareholders had also expressed concerns about what was offered under the proposed merger, presenting additional complications.

TAGS: aviation

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