What are your thoughts on the bae/eads merger?

R JO

R JOHNSTON | EDISON INVESTMENT RESEARCH
The advanced merger talks clearly have good industrial logic with BAE now feeling over-exposed to defence and EADS clearly looking to gain a foothold in the US. The key question is whether this deal could kick off a wave of consolidation in Europe.

BENJAMIN FIDLER | DEUTSCHE BANK
Whilst we recognise some of the potential positives the deal could bring, it carries with it significant integration risk. We see the benefits of the transaction more clearly for BAE than EADS. We maintain our ‘buy’ rating on BAE on the basis that other potential suitors could emerge.

EDWARD STACEY | ESPIRITO SANTO
We believe that these talks highlight the cheap valuation of BAE, and the possibility that it could find other strategic suitors. Also we believe that accelerating consolidation bodes positively for other defence-centric plays in the sector such as Chemring, Qinetiq and Ultra Electronics.