BAE looks to merger lifeline to stay on course

If the proposed merger of BAE Systems with Airbus parent EADS were to come off, it would come as a lifeline to a company that could otherwise find itself without a clear strategy in a shrinking industry or a takeover target for predatory US rivals.

To go through, Europe's biggest defence deal would need to clear many hurdles, including a row over the proposed 60/40 EADS-BAE ratio, modalities for ring fencing top-secret projects and securing consent from governments keen to safeguard EADS operations in France and Germany.

If the proposed merger were to fall foul of the numerous political and regulatory obstacles in its way, BAE would be left stranded and Ian King, its chief executive of four years, would be faced with tough questions about his vision for the company, both past and present.

In its latest annual report BAE chairman Dick Olver said among the group's main strategic aims were development of its export business, building on its large geographic footprint and pushing growth at its cyber security arm.

"BAE Systems maintains a well-defined strategy with a defence focus at its core, but with the flexibility to adapt to changes in the business landscape," wrote Olver.

"BAE Systems will continue to keep its strategy under review and will move to adjust its portfolio of businesses where it is in the interests of shareholders to do so."