Enders hails ‘perfect’ tie-up with BAE

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Tom Enders, chief executive of EADS, told staff on Wednesday that he would “soon” be in a position to make public details of its proposed £38bn combination with BAE Systems which he called “a perfect fit” in his first public statement since news of the deal leaked last week.

In a letter to the aerospace group’s employees, Mr Enders said the deal was essential for the “internationalisation” of EADS and would allow it to meet its plans for long-term growth, seven years earlier than the current 2020 target date.

BAE would bring “key assets which complement our portfolio and our geographical spread”, he said.

Mr Enders added: “The strategic purpose of this combination is not size. The purpose is to lay the foundation for our long-term competitiveness in the rapidly changing landscape of the aerospace and defence industry.”

He confirmed that intensive discussions were under way about the governance of the new group, especially dissolving the current arrangements and reaching agreements with various countries that would give Germany, France, Spain or the UK an effective veto power over significant corporate decisions that went against their national interests.

Currently, Berlin and Paris enjoy the ability to exercise day-to-day influence over EADS.

Mr Enders told staff: “Governance and national security interests are currently the focus of our work. If we succeed and if the EADS shareholder pact can be dissolved, our governance will be significantly simplified and ‘normalised’.

“We are in constructive and advanced discussions with all relevant governments and are trying to accommodate their concerns and national security interests as best as possible within the framework of our envisioned transaction.

“Good governance is a key prerequisite for both companies, it’s the ‘go’ or ‘no-go’ for this project!”

He admitted that the group had “some serious work to do . . . to convince shareholders and investors that we are on track to build a stronger growth platform with more resilient financials and better shareholder returns”.

Some BAE investors are far from convinced that the deal makes sense for them. BAE’s shares are among the highest yielding in UK markets and at least one analyst has said that BAE is ceding control of its independence just as some respite from recent cuts in US and UK defence spending appear on the radar.

But Mr Enders added: “I’m convinced we have a very good and very attractive story to tell!”

He said the two companies were “largely complementary and have very little overlap”.

The real advantage, he argued, would come for EADS’ military businesses, which faced “flat or shrinking budgets in our ‘home countries’ [meaning that] further internationalisation . . . is a MUST [sic].

“And this is exactly where a combination with the world’s most international defence company would benefit all of us.”

He said there would be synergies with BAE, enhancing the chance of developing future fighter aircraft such as the Eurofighter and Rafale.

Mr Enders said: “I strongly believe this deal represents what is called a ‘perfect fit’: it doesn’t add complexity, it provides opportunity.

“Despite some initial critical reactions, word will soon go around, that this deal makes good business sense.”

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