Boeing, BAE Reportedly in Merger Talks
U.S. aerospace giant Boeing Co. and BAE Systems, the British defense company formerly known as British Aerospace that is a major shareholder in Boeing rival Airbus Industrie, are reportedly in talks that could lead to a $46-billion merger, a British newspaper said Sunday.
The companies, which already have close ties working together on the T-45 Goshawk military plane and the AV-8B Harrier fighter aircraft, declined to comment on the Sunday Telegraph report. Analysts have said BAE might be looking for a closer union in the U.S. as its European partners combine to form the European Aeronautic Defense & Space Co.
BAE is the world’s second-largest defense contractor behind the No. 1 U.S. weapons supplier Lockheed Martin Corp. and is also a 20% shareholder in Airbus, the four-nation European commercial plane-making consortium that is Boeing’s chief rival.
Boeing spokeswoman Susan Bradley in Seattle said the company doesn’t comment on unconfirmed reports about mergers and acquisitions. BAE spokesman Charlie Miller said that although BAE has “a very good relationship with Boeing,” a merger “is pure speculation.”
BAE Systems, which dropped the “British” when it renamed itself to better reflect its global aspirations, would get better access to the U.S., the world’s biggest military spender, through Boeing. The Seattle-based company is the world’s largest maker of civil and military planes.
BAE has been intensifying ties with Boeing. The companies agreed last month to form a joint Internet trading exchange along with Lockheed and Raytheon Co. They said in February that they’re considering a possible joint bid for an equity stake in Korea Aerospace Industries Co.
The Sunday Telegraph said talks were “intense earlier this year,” though they have “cooled slightly as the U.S. election campaigns accelerate.” The newspaper cited no sources in its report. Another British paper, the Sunday Times, said in December that the companies were discussing an “alliance.”
Boeing and BAE cooperate on a project to build the Meteor, a proposed beyond-visual-range missile. BAE is also providing electronics expertise to Boeing and Lockheed on the Joint Strike Fighter program, the most lucrative aircraft program in military aviation history.
Some analysts have said the companies will probably seek ways to unite some of their military operations because a full merger would be more complex, given BAE’s stake in Airbus.
BAE will “get together and talk more about project-specific programs,” with Boeing, predicted Doug McVitie, managing director of Arran Aerospace, a Scotland-based consultant. “But it can’t merge; it would be thrown out of Airbus.”
A merger would also need the support of the British government, which has just agreed to provide funding for Airbus’s planned superjumbo jet project.
Meanwhile, BAE is competing with its Airbus partners, France’s Aerospatiale Matra, Germany’s DaimlerChrysler Aerospace and Spain’s Construcciones Aeronauticas, which are forming EADS, to win over the defense arm of Italy’s Finmeccanica. Analysts favor EADS’s chances.
On Friday, Boeing shares closed at $35.69, down 44 cents on the New York Stock Exchange.
