The World’s Largest Aerospace and Defense Group : Next Time ….

Photo: flickr.com/Andrei Dimofte

Boeing no longer has to worry, the project of EADS and BAE to merge into the largest  aerospace and defense group to date was aborted last Wednesday. The companies did not press the British Takeover Panel — in charge of the regulation and supervision of takeovers — on their desire to prorogue the deadline fixed by the UK legislation.

The majority of the press accused German Chacellor Angela Merkel to be the cause of the plan change. In the end, Britain and France managed to find a common interest, but Germany did not  back the deal.

This refusal was not clearly justified by the German state. One thing is certain: the idea of getting a stake in EADS had been the source of a lively debate between Merkel and Minister of Economics and Technology Philip Rösler, president of the liberal party, for several weeks. Berlin also feared the transfer of Airbus activities in France after the merger.

Germany has already suffered the consequences of a similar type of plan in the past. In 1998, the fusion between the French Rhône-Poulenc and the German Hoechst caused a transfer of working force from one side of the Rhine to the other.

The French newspaper, Le Monde, also pointed a deeper motive of the Chancellor’s position. The newspaper said Merkel’s pacifist ideology prevented her from supporting the fusion. For the same reason, she did not support the Franco-British intervention in Libya last year.

However, this does not mean the end of the cooperation between the two companies. BAE CEO Ian King said: “We have a great working relationship with EADS and we will work together as tightly as ever on our joint projects, which include the Eurofighter project and MBDA, the joint missile program.”

The Eurofighter program is a consortium between BAE, EADS, Italy, and Spain. The program is worth £20 billion. With regards to the MBDA program, EADS and BAE have a joint venture with the Italian conglomerate Finmeccanica. Their current orders are valuated at £8.5bn. BAE and EADS may also cooperate on the Thyphoon fighter program.

Individually, each of the players is planning on expanding on the international market. BAE may be investing in fast-growing Middle Eastern markets, while EADS might expand its US contact having opened its Airbus final assembly line in Alabama.

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  1. […] by planning to create a merger with BAE Systems, a top British defense manufacturer.  However negotiations for a merger broke down when German Chancellor Angela Merkel vetoed the proposal on October […]

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