October 01, 2012
Credit: Credit: BAE Systems
The bosses of EADS and BAE Systems sought to reassure investors over the benefits of their planned $45 billion merger amid what they described as “myths and misconceptions” over the creation of a pan-European defense giant.
BAE Systems chief executive Ian King and Tom Enders, his counterpart at Airbus parent EADS, said in a joint newspaper article that the plan to join forces was born out of “opportunity, not necessity,” and would create growth.
“With the necessary political will and support, management determination and proper governance, BAE Systems and EADS can produce a whole that is greater than the sum of its parts,” they wrote in the article to be published in three European newspapers on Monday.
EADS shares have fallen 17 percent since Sept. 12, when word of the negotiations was leaked. After shedding initial gains, BAE shares are back to where they were beforehand.
Some analysts have said the two European companies are being forced to combine because of steep cuts to national defense spending and have criticized what they see as a lack of synergies, the cost and revenue benefits usually targeted in a merger.
The two chief executives said the wider group, which would be the world’s largest aerospace and defense company, would better be able to ride the cycles of civil aviation demand and defence spending.
“The rationale that drives this transaction is growth, not contraction,” they wrote.
UK-based BAE Systems is Europe’s largest defense contractor and Airbus, which dominates the finances of EADS, is the world’s largest commercial planemaker ahead of U.S. rival Boeing Co .
BAE has started re-investing in the buoyant commercial sector after pulling out of Airbus in 2006, while EADS has long sought to expand its defense activities, which remain a long way behind the successful passenger aircraft division.