BAE surges on possible tie-up with EADS
Shares in defence group BAE Systems surged before the close of trade on Wednesday after it confirmed rumours that it is in talks with European aerospace giant EADS regarding a 'possible combination'.
Shares in defence group BAE Systems surged before the close of trade on Wednesday after it confirmed rumours that it is in talks with European aerospace giant EADS regarding a 'possible combination'.
"BAE Systems and EADS have a long history of collaboration and are currently partners in a number of important projects, including the Eurofighter and MBDA joint ventures," BAE said in a statement.
"The potential combination would create a world class international aerospace, defence and security group with substantial centres of manufacturing and technology excellence in France, Germany, Spain, the UK and the USA."
MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
As well as offering the prospect of "significant benefits" for customers and shareholders of both companies, BAE believes that the merger could also save on costs and present "substantial new business opportunities".
BAE's shares were up 7.39% at 353p.
The tie-up would see BAE's shareholders hold a 40% interest in the enlarged group, while EADS's shareholders would own 60%. BAE said that there would be a "unified board and management structure". As both companies have historically had different dividend policies - BAE has paid a higher proportion of its earnings in dividends - EADS would pay £200m to its shareholders prior to completion "to better align the parties' payout ratios".
The potential merger would be implemented through the creation of a dual-listed company structure. This means that both companies would operate as one group but would be separately listed on their existing respective exchanges in London (BAE) and Paris (EADS).
'...highly secure and sensitive...'
The companies have been discussing the potential implications of the proposed transaction with a range of governments given that they operate "highly secure and sensitive defence businesses" around the globe.
They said that they would have to ringfence some of their defence activities "with governance arrangements appropriate to their strategic and national security importance, particularly in the USA, given the importance of that market to the enlarged group."
The statement said: "Subject to receiving appropriate shareholder approvals, the parties envisage issuing special shares in BAE Systems and EADS to each of the French, German and UK governments to replace the existing UK government share in BAE Systems and the stakeholder concert party arrangements in EADS.
Get the latest financial news, insights and expert analysis from our award-winning MoneyWeek team, to help you understand what really matters when it comes to your finances.
MoneyWeek is written by a team of experienced and award-winning journalists, plus expert columnists. As well as daily digital news and features, MoneyWeek also publishes a weekly magazine, covering investing and personal finance. From share tips, pensions, gold to practical investment tips - we provide a round-up to help you make money and keep it.
-
Michelin Key Hotels 2025: the top destinations in the world
The Michelin Keys have been awarded to spectacular hotels across the world. From Marlon Brando's private resort in Polynesia to a Bvlgari hotel in Tokyo, we look at some of the most extraordinary stays in 2025
-
MoneyWeek news quiz: How much could you get in car finance compensation?
The car finance scandal, inheritance tax, and house prices all made headlines over the past few days. Test your knowledge while reviewing this week’s top stories with MoneyWeek’s news quiz