Failed Aerospace Merger : Zintro experts provide some answers

What happened to the aerospace merger ofEADS and BAE Systems? We put this question to our Zintro experts to provide perspective around the pros and cons of the failed deal.

Keith Sowell, an expert in the aerospace industry, says that the EADS and BAE Merger fell apart because Britain,France and Germany could not agree on the merger, fearing losses and gains increases that were not resolved. “Each country stated that there would be unacceptable losses in some areas of the merger that would give others the upper hand over some current stock holders.Germany and other nations have Golden Stock in EADS and have veto power,” Sowell explains. “The deal was stopped by Germany’s Chancellor Merkel. Germany feared that the merger would decrease its lead in EADS, and it insisted that the headquarters be based in Berlin. This did not help matters.”

Sowell says that Britain was afraid France would end up with too much power in its stocks. BAE was hoping for a boost due to losses in business from a slowdown of military sales to the US and Europe. As fro the pros and cons, here is Sowell’s take:

Pros: “The merger would have made the company the size of Boeing with both military and commercial sections. The size and logistics of the company would have made it a true contender in the world of aerospace industries,” he says.

Cons: “I don’t see any cons. Even if Germany would have ended up with a smaller stake, it still would have been part of a larger investment and netted Germany some perks and an opportunity to spread its leadership further and to more customer potential. I think Germany may have just lost the deal of a lifetime that could have been useful in advertising its own skills in aircraft manufacture,” Sowell says.

Ivana Palmieri, an attorney with expertise in aerospace and aviation issues, says that the negative from Germany to close the merger was the result of political fear of being excluded from decisions;France and Great Britain are both are ahead in aerospacial and defense developments. “The three countries are interested in protecting employment and their industries, especially now when the European crisis is engulfing the continent,” she says. “I think France wanted to keep its share portion in EADS while Great Britain was looking to absorb the impact of the budget cuts announced by the government in September.”

Palmieri says that BAE would have found its way to diversify its production and make a technological complementation with airbus, particularly in the commercial products sector. “I think that the incapability of the three government to arrive at an agreement is a sign of bigger problems that they are having in the European Union, such as saving the euro and the safety of the banking system,” she says. “The merger may have been too ambitious.”

By Maureen Aylward


Recently, some of the following topics have seen inquiry activity: