30 November 1999: BAE Systems formed in £7.7bn merger

On this day in 1999 British Aerospace merged with Marconi Electronic Systems to form BAE Systems, one of the biggest arms manufacturers in the world.

When thinking of international business successes, it's unlikely that the name “Marconi” is in anyone's minds. After all, Marconi Plc, the telecoms company and successor to GEC, imploded spectacularly after the dotcom bubble, after a series of disastrous management decisions. But there was another Marconi – Marconi Electronic Systems – that had been spun off from GEC, and went on to form half of one of the world's biggest arms manufacturers (or defence companies, if you prefer).

The last years of the 20th century saw huge consolidation in the defence industry. Boeing and McDonnell Douglas merged, and Lockheed Martin was formed by the merger of Lockheed and Martin Marietta. Europe had designs on a consolidated defence company of its own, which eventually became EADS, then Airbus.

Britain was not to be left out. We had our own defence and aerospace companies in British Aerospace (BAe), which, as the name implied, built planes. Marconi built radar and other electronic systems for the space and naval sectors. BAe was considering a merger with Germany's Daimler Chrysler Aerospace. But when GEC put Marconi up for sale, BAe feared it would be acquired by a US company and pose a threat.

And so on this day in 1999, British Aerospace and Marconi Electronic Systems merged, in a £7.7bn deal, and BAE Systems was formed. It makes everything from fighter jets to tanks and warships, and is now Europe's biggest defence company, with sales in 2011 of some $21bn, says Forbes.

Among world arms companies it is the fifth biggest in terms of sales, after Lockheed Martin, Boeing, Northrop Grumman, Raytheon and General Dynamics. The bulk of its business comes from the US, where it owns several subsidiaries. The UK is its second-biggest market. A smaller but still very significant market is Saudi Arabia. Its highly controversial and politically sensitive £40bn Al Yamamah oil-for-arms deal was the focus of several corruption investigations, including by the Serious Fraud Office and the US government.

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