Both London-based BAE Systems and Paris-based European Aeronautic Defense and Space lost out when their plans to merge were derailed by European government officials.
But the fall-out might not be the same for both companies. BAE Systems’s U.S. business may actually come out stronger, spared now from questions about European ownership, while EADS North America seems to have missed out on another chance to grow its footprint in the United States.
The Herndon-based company, which was incorporated in the United States in 2003 and received its special security agreement allowing it do classified work in 2006, still has a relatively small U.S. presence, despite significant efforts to expand in recent years.
EADS suffered a key setback in its pursuit of work to build a next-generation aerial refueling tanker, a massive program ultimately won by Boeing in 2011.
In 2008, EADS thought it had won the deal after it partnered with Northrop Grumman. But the decision was overturned after the Government Accountability Office upheld Boeing’s protest. EADS bid alone in 2011 — after Northrop backed out — and lost.
“They’ve tried pretty much every method, from ... teaming to bringing foreign products to Americanize them,” said Roman Schweizer, an aerospace and defense policy analyst at Guggenheim Securities. “It was tough over the last decade when defense spending was flush, and now as we’re headed into this downturn period, it’s going to be even tougher.”
Still, the company doesn’t appear to be giving up. Perhaps best known in the United States for providing the Army with the Lakota light utility helicopter, it hosted a media event last week to showcase its offering for the Army’s Armed Aerial Scout helicopter competition. The AAS, as it is called, is the latest program in a years-long effort to replace an existing aircraft.
At the presentation, Sean O’Keefe, chief executive of the Arlington-based North American unit of EADS, said the company has invested tens of millions — he declined to be more specific — of its own money to build and demonstrate prototypes. If it won the program, the aircraft would be built in Mississippi.
“We’re committed to the U.S. market,” he told reporters. “We’re disappointed that we weren’t able to bring [the merger] together ... Moving forward, we’ve still got lots of opportunities.”
O’Keefe has said in the past that the company is seeking U.S. acquisitions. Byron Callan, a director at the Washington-based research firm Capital Alpha Partners, said that might provide one promising way to expand.
“There are going to be more defense properties ... that will be available in the market in 2013 or 2014,” he said. EADS could “be at bat a couple more times in the defense M&A game.”
Philip Finnegan, director of corporate analysis at the Teal Group, said EADS might pursue companies that do work in training and simulation or defense electronics.
Still, Schweizer said the timing isn’t ideal for the foreign-owned company.
“The Pentagon is going to have to consider the U.S. industrial base when it makes source selection decisions,” he said. “The tough position [EADS is] in is really exacerbated by the looming budget environment.”