BAE's 335bn deal may not take off (From Lancashire Telegraph)

BAE's 335bn deal may not take off

3:45pm Tuesday 25th September 2012 in News By Lisa Woodhouse, Assistant picture editor

AEROSPACE company BAE has warned that it may walk away from a 35billion Euro merger deal with Airbus-maker EADS if it harms their US deal with the Pentagon.

A source close to the company said: “BAE will not do a deal if it harms its US position.

“The company’s US position as a Plc is very strong. BAE is the largest non US supplier to the Pentagon and its US business is significantly larger than its UK business.

“BAE won’t progress with the deal unless the US deal is protected.”

Around 50 per cent of the company’s sales are to the US Pentagon. A further 25 per cent comes from the UK.

A decision on whether to progress with the merger is expected to be made by October 10. If talks with the various governments are still ongoing BAE will ask for an extension.

If needed, BAE will ask for an extension because it says it is committed to making the deal go ahead.

The company is talking to a number of governments about the potential merger.

It has been widely reported that the British Government is supportive of the potential merger. And the French and German governments, who have a stakehold in EADS, “remain engaged”.

The source said all governments were interested in retaining sovereign capability to design, build and service fighter aircraft.

However, the merger could create further jobs at the Samlesbury and Warton sites in Lancashire.

“BAE doesn’t anticipate any changes to the footprints of either site. If BAE take over the global defence capabilities there could be more opportunities for employment in the UK.”

It is believed the enterprise zone plans for the two sites would be unaffected by the merger, and the sites had room for growth if required.