BAE mega merger highlights difficult outlook for defence

THE FAILED merger between BAE and EADS indicated the “difficult” defence outlook, Morgan Stanley said yesterday, highlighting the unlikelihood of a tie-up between the British defence firm and a prime US company.

“The proposed merger could be seen as an indication that the outlook for defence is more difficult than is currently expected,” said the investment bank.

Meanwhile, it is understood that Germany wants to quickly increase its stake in EADS, before car manufacturer Daimler offloads its shares on the open market.

City A.M. understands that state-owned bank KfW will increase its stake to 13 per cent from one per cent, including buying a 7.5 per cent stake currently held by car maker Daimler.