BAE Says EADS Deal Was ‘Window of Opportunity’ That’s Now Closed
BAE Systems Plc (BA/) Chairman Dick Olver said the attempted merger with European Aeronautic, Defence & Space Co. last year came at a moment that won’t return anytime soon, as the company resumes its focus on bolt-on purchases.
“I don’t think you could say that it’s an evolving process,” Olver said in an interview at the annual general meeting in Farnborough south of London today. “There was a window of opportunity and that window is closed, for now at least.”
The two companies unveiled a plan to combine in September, in what would have created a European counterweight to Boeing Co. (BA) with a balanced focus on civil aerospace and defense. The deal collapsed four weeks later, mainly because the German government opposed the combination out of concern the country’s interests wouldn’t be adequately represented in the new group.
Olver said “pricing” would make it much harder to pull off the same deal again now. Under the previous plan, EADS would have held 60 percent of the enlarged entity, and BAE the rest. EADS shares have gained more than 50 percent since talks ended in October, while BAE is up about 17 percent.
While EADS Chief Executive Officer Tom Enders used the failed merger to push ahead with an overhaul of the shareholder structure, BAE has remained largely untouched by the breakdown. Olver and CEO Ian King told shareholders today the earnings are in line with their expectations, and left unchanged a full-year guidance of higher earnings.
BAE is continuing the search for a new chairman, with Olver, set to retire a year from now. A replacement will be named this year, the company has said. Olver said the company will continue with its acquisition strategy, which remains unaffected by the cuts to the U.S. defense budget.
“It would be wrong to say that we need any sort of Tier 1 deal in any part of our business,” Olver said. “We’ve been concentrating on bolt-ons, especially in cyber.”
BAE remains in talks with Saudi Arabia over price escalation terms for Typhoon planes, built in conjunction with EADS and Finmeccanica SpA (FNC), as it restarts deliveries having already handed over 24 of the jets. King said he’s not pressed for time and would rather ensure the accord has the right fit.
“It’s getting the right deal rather than being focused on timing,” he said in an interview at the shareholder meet.
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