BAE Systems Plc (BA/) will sell 12 Eurofighter Typhoon combat jets to Oman in a deal to be announced this week, two people familiar with the talks said.
The contract is set to be announced Dec. 21 in Oman, said one person who asked not to be named because the plans are private. The deal is valued at more than $1 billion.
Middle East sales are critical to BAE as defense spending slumps in its two largest markets, the U.S. and U.K. BAE, which is working to win a follow-on Typhoon contract in Saudi Arabia, said today earnings could be hurt because of delays in concluding price negotiations with the kingdom over a contract for the combat jet first signed in 2007.
In the aftermath of the botched European Aeronautic, Defence & Space Co. (EAD) merger, BAE pledged to conclude the Omani contract before 2013. Talks slowed earlier this year because Oman was dissatisfied with progress on a delayed naval vessel contract and recently centered on resolving differences over support conditions for the fighter.
BAE, in an e-mailed statement, said it has had “positive” discussions with Oman, though a contract has yet to be signed.
Oman, which is also buying F-16 combat jets from Bethesda, Maryland-based Lockheed Martin Corp. (LMT), will purchase the latest version of the Typhoon, one of the people said.
The Middle East order would come after setbacks for the Eurofighter consortium in India, Japan and Switzerland where it lost competitions to rivals from France, the U.S. and Sweden. Production of Typhoons could end this decade without further commitments.
The Typhoon purchase was not open to competition, leaving the Eurofighter consortium, which includes EADS and Finmeccanica SpA (FNC), still looking for its first competitive win in more than a decade. Austria chose the Typhoon over rivals in 2002 in a deal led by EADS which is now being investigated by the Austrian government over allegations of kickbacks.
Exports are becoming increasingly important for U.S. and European defense companies as their domestic buyers scale back spending. Fighter competitions to be decided next year include the battle between Typhoon, the Lockheed Martin F-35 and Boeing Co. (BA) F-15 in South Korea and a pending contest in Malaysia.
BAE said it expects to resume deliveries of Typhoons to Saudi Arabia next year even as discussions over pricing of the combat aircraft continue. The company, which had hoped to conclude those talks this year, said today discussions over “acceptable pricing” may not be completed in 2012, reducing full-year earnings per share by 3 pence.
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