BAE Remains ‘Robust’ After Failed Merger with EADS

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BAE Systems plc (LON:BA) revealed today that, despite the failed merger talks with EADS NV (EPA:EAD), its core business remains “robust” and it expects to meet the set profit targets. The London-based company expects “modest growth” in EPS this year if price negotiations with Saudi Arabia over a fighter-jet order are concluded on time.

The company’s Chief Executive Officer Ian King expressed his disappointment over the failed merger with European Aeronautic, Defense & Space Co.g “Our business remains strong and financially robust,” said King in the statement. “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.”

BAE Remains 'Robust' After Failed Merger with EADS

Following the failed attempt to the merge with European Aeronautic & Defence Co., BAE Systems came under heavy criticism from local media. The failed talks highlighted the fact that BAE Systems plc (LON:BA) and EADS NV (EPA:EAD) management failed to reconcile differences amongst the British, French, and German governments over the ownership control. The deal, if it had gone through, would have created the world’s largest aero defense group by sales ahead of Boeing Co. (NYSE:BA).

An excerpt from Daily Telegraph reads, “BAE-EADS has, frankly, been a horlicks, which isn’t surprising given how difficult it was going to be to execute. The one winner is Boeing which has escaped seeing a much bigger, global competitor arrive on its doorstep capable of disturbing its domestic dominance. BAE Systems plc (LON:BA), meanwhile, lives to see, if not fight, another day and the prospects for Olver especially look grim”.

The Times of London said, “Possibly the most damning comment from the BAE Systems management last night, as they stared blankly at the wreckage of their failed merger with EADS NV (EPA:EAD), was this from the chairman, Dick Olver: ‘This merger was an additive to our strategy, not a replacement to our strategy.’ Goodness. If a £28 billion merger, reversing a decision made six years ago to take BAE out of civil aviation and that in the process put at risk BAE’s hard-won position in the U.S. defense sector, was not a replacement strategy, it would be good to hear Mr Olver’s definition of one. Taking BAE Systems plc (LON:BA) into online retailing, perhaps”.

Despite the failed talks, EADS board showed its confidence in Chief Executive Tom Enders. Just a day after the collapse of merger talks with BAE Systems plc (LON:BA), board encouraged its Chief Executive to continue his leadership of the company, saying “The board expressed strong support for Tom Enders and his team and encouraged him to continue on his track”.

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