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BAE Systems, EADS reveal merger talks

Thu September 13, 2012 3:06am

BRITISH arms maker BAE Systems and European aircraft manufacturer EADS are in talks over a possible merger that would create a global leader in aerospace, defence and security, the pair say.

"Further to the recent movement in BAE Systems' share price, BAE Systems plc and EADS confirm that they are in discussions regarding a possible combination of their businesses," the companies said in a joint statement that confirmed market rumours.

The talks envisaged BAE Systems owning 40 per cent of the enlarged group, with EADS holding a majority 60-per cent stake, according to the statement.

"The potential combination would create a world class international aerospace, defence and security group with substantial centres of manufacturing and technology excellence in France, Germany, Spain, the UK and the USA," it added.

Both groups have a long history of collaboration and are current partners in joint ventures including the Eurofighter project and the MBDA missile systems firm.

The new enlarged company would have a unified board and management structure with identical boards and executive committees at each of BAE Systems and EADS.

"This potential combination would be implemented through the creation of a dual listed company structure, under which both companies would operate as one group by means of equalisation and other agreements but would be separately listed on their existing exchanges," they added.

Under the proposals being discussed, the two groups would issue special golden shares in BAE Systems and EADS to each of the French, German and British governments.

This would replace Britain's stake in BAE Systems and the stakeholder arrangement in EADS, the pair said.

News of the deal, which remains subject to shareholder approvals, sent their share prices surging higher in late afternoon deals on Wednesday.

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