EADS, BAE likely to unite, battle Boeing defence dominance

UK defence contractor BAE Systems and EADS (European Aeronautic, Defence & Space Co) announced on Wednesday that they are in talks to combine their businesses.

BAE and EADS confirmed discussions in a statement to the London Stock Exchange, saying that under the proposed merger, BAE Systems shareholders would own 40 per cent and EADS shareholders 60 per cent of the enlarged group.

The joint venture is clearly aimed at defence rather than civilian aircraft. Analysts see it as a clear shot at catching up with Boeing of the US in the defence business.

The two European companies have been mulling joining forces for about 10 years now, in a venture that would balance civil and defence operations in an era of shrinking military budgets.

Apart from the popular Airbus, EADS also controls helicopter maker Eurocopter, satellite builder Astrium and defence electronics contractor Cassidian.

Boeing is clearly ahead in the race so far – it even went to court over a huge contract to build new aerial refuelling tankers for the US Air Force. Boeing finally won the contract.