Although the merits of this ambitious merger were always clear, many will not be aware of the technical nuances involved with a deal of this magnitude, such as stock exchange etiquette and share price protection. It seems rather sloppy to me that BAE chairman Dick Olver and chief executive Ian King did not clear the decks with the Pentagon before making the merger announcement to the market, since BAE does 40 per cent of its business with the US. Surely hell had a better chance of freezing over than this merger going through on these terms: EADS would have owned 60 per cent of the new company, while Germany and France were insisting on keeping their 9 per cent stakes – stakes that BAE should have insisted were offered to the public. This debacle is not only embarrassing for BAE, but has also made them vulnerable.
David Buik is spokesperson for Cantor Index.
Michael van Dulken
The merger’s failure cannot be solely attributed to BAE’s leadership. Mergers in the aerospace and defence sector are complicated: a deal of this size was always going to be problematic with the regulatory, political, national security and trades union issues that would need reconciling. As a result, consolidation in the industry can be notoriously slow, and some may still consider us to be in the early stages of a deal. Complicated shareholding structures involving governments made it obvious that it was always going to be a bumpy road towards a merger, with the national security interests of Germany, France, UK and US all at stake. While the idea of a combined BAE/EADS makes theoretical sense, in terms of competitiveness with peers in the US, it was always going to be a difficult sell. If anything, it may be a good thing that negotiations did not drag on.
Michael van Dulken is head of research at Accendo Markets.