BAE and EADS are currently discussing a possible combination of the two companies. This combination comes in face of shrinking defense budgets and very high competition for defense contracts. The two companies already work together on several different defense projects, such as the Typhoon jet and a joint missile project.
When combined BAE and EADS eclipse the world's current largest defense company, Lockheed Martin, having earned over $20 billion more than Lockheed Martin in sales last year.
BAE and EADS expect there to be many benefits from the potential merger, citing benefits including cost savings, such as from procurement and sourcing efficiencies available to the enlarged group, and substantial new business opportunities.
Any agreement on the terms of a potential combination will require approval by the boards of EADS and BAE Systems. Prior to any such agreement, EADS will inform the relevant bodies representing the interests of its employees in accordance with applicable laws and regulations. If, after completion of the processes described above, EADS and BAE Systems reach definitive agreement on the terms of any combination, completion would be subject to, amongst other things, a number of governmental and regulatory approvals, the approval of ordinary shareholders of both BAE Systems and EADS, and certain conditions that are customary for a transaction governed by the City Code on Takeovers and Mergers.
There is no certainty whether the discussions will lead to any mergers.
Any merger announcement will need to be made by October 10, 2012, though BAE has stated its intention to request an extension if talks are still in place at that point.
If these two companies do merge the result will be a force to be reckoned with. Both EADS and BAE have a lot of strength and long histories in the defense industry. The benefits of the combination seem plentiful, with both companies standing to benefit from the manufacturing capabilities, locations, and established customer base of the other.
Keep following M&AE to find out more as news on the possible combination breaks!
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