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Capital Business
Posted at 02:55 PM ET, 09/12/2012

BAE Systems and EADS are considering combining their businesses

London-based BAE Systems and Paris-based European Aeronautic Defence and Space said Wednesday that they are discussing combining their businesses in a move that would reshape the aerospace industry.

The combination would create a major competitor for Boeing, said Loren Thompson, an industry consultant who works with BAE.

“The two companies fit together quite well because they’re both European aerospace companies, and yet [EADS] is concentrated in commercial markets, [BAE] in military markets,” he said.

The agreement now under consideration would create a dual-listed structure and give BAE shareholders 40 percent and EADS shareholders 60 percent of the unified group. Because BAE has historically paid more of its earnings in dividends, EADS would pay 200 million euros to its shareholders under the deal.

The companies said they have begun talks with multiple countries’ governments about the deal because their businesses operate in the United States, the United Kingdom, France, Germany, Saudi Arabia and Australia, among other locations.

Both companies’ U.S. businesses are based locally, BAE in Arlington and EADS in Herndon. BAE has about 40,000 employees in the U.S., while EADS North America has more than 3,000.

In a statement, a BAE spokesman said the combined company would be able to invest in the U.S. market and be more efficient, potentially lowering prices for the U.S. government.

The companies cautioned that the EADS and BAE boards must approve the combination and that there is “no certainty” these talks will result in a deal.

BAE, which has more than 90,000 employees, reported 2011 sales of 19.2 billion pounds ($30.7 billion), while EADS, which has about 119,000 employees, reported 2011 sales of 49.1 billion euros (worth $63.6 billion on Dec. 31).

Follow Marjorie Censer on Twitter: @CommonCenser

By  |  02:55 PM ET, 09/12/2012

 
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