BAE Systems and EADS in talks over merger

UK defence contractor BAE Systems has said that it is in talks with European aerospace firm EADS over a possible merger.

“Both companies would operate as one group by means of equalisation and other agreements but would be separately listed on their existing exchanges,” BAE said in a statement.

In a potential tie-up, BAE would own 40% and EADS 60% of the new firm.

Speculation that talks were ongoing sent BAE shares up 8% on Wednesday.

Already BAE Systems in May said it was planning to axe more than 600 jobs and close its Newcastle factory where tanks were made for World War I.

Subject to consultation, some 620 jobs could be lost at sites across the UK, including up to 330 at Newcastle.

About 200 jobs will be lost at sites in its munitions business, including Radway Green near Crewe and Glascoed, near Pontypool and 97 in Washington.

Up to 10 jobs may go at the firm’s head office in Farnborough, Hampshire. BAE has recently signed a £1.9bn ($3bn) deal to supply Hawk trainer jets to Saudi Arabia.

France’s finance minister says the planned merger of defence giants BAE and EADS needs close scrutiny raising delays through political wrangling.The potential pairing of a top Boeing partner with its fiercest competitor shows how deeply the deal could disrupt the complex relationships in the aerospace and defence industries, which account for hundreds of billions in sales a year.

The BAE-EADS merger would create the world’s largest integrated defence and commercial aviation company with annual sales of $92.4 billion (56.9 billion pounds), topping Boeing by more than a third, based on 2011 figures.

The potential pairing of a top Boeing partner with its fiercest competitor shows how deeply the deal could disrupt the complex relationships in the aerospace and defence industries, which account for hundreds of billions in sales a year.

The BAE-EADS merger would create the world’s largest integrated defence and commercial aviation company with annual sales of $92.4 billion (56.9 billion pounds), topping Boeing by more than a third, based on 2011 figures.

Boeing initially said it did not see a big threat, but its top defence executive told Reuters this week the deal raised national security and industrial concerns that needed to be addressed.

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