BAE Systems’ £30 billion merger with European aerospace combine Eads was under further pressure today as a major UK institutional investor expressed doubts over the deal.
David Cumming, head of equities at Standard Life Investments — which owns 0.84% of BAE — warned over the political hurdles to the deal and criticised the company’s lack of communication with major shareholders to explain the tie-up. “We’re in the sceptical camp at the moment,” he said.
The merger — rushed out last week after a leak — would see Eads holding 60% and BAE 40% of the new company, but the French and German governments each own 22.5% of Eads. The US government, a major customer of BAE System, has national security concerns, while Britain — which could block the deal with its ‘golden share’ — also has worries over the security of its Trident nuclear submarine programme.
Cumming told Radio 4’s Today programme: “I think it is a difficult deal as you’ve got US concerns over defence technology leakage and you’ve got political issues — not just Germany and France but also the UK. There’s golden shares all over the place, so we’re relatively sceptical. Also, BAE have been shy in communicating the rationale for the deal to shareholders — it’s all very quiet out there.”
Moody’s however said today that news of the tie-up could potentially flush out other rival suitors in a new round of industry consolidation. Its analysts said: “We expect the merger talks have triggered at least consideration of a new round of business realignments within the global aerospace and defence industry.”
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