Report: BAE, EADS Combination Talks at ‘Advanced Stage’

BAE Systems and EADS are discussing a potential combination with talks at an advanced stage, Bloomberg reports.

If the deal goes through, BAE would retain its independence to operate in the U.S. defense market, a source told Bloomberg.

Linda Hudson, CEO of BAE’s U.S. subsidiary, recently said the potential of large U.S. budget cuts resulting from sequestration could foreshadow consolidation within the U.S. defense industry.

BAE’s stock price rose 12 percent, to $589.36 per share on the London Stock Exchange, while EADS fell close to 2.9 percent in Paris at around $30.8 billion.

According to the Wall Street Journal, BAE shareholders would own 40 percent in a dual-listed firm with EADS shareholders holding the rest and also receiving $321.4 million prior to completing the transaction.

By Oct. 10, the companies must either announce a transaction or say they do not plan to pursue the deal, the Journal reports.

The French, German and U.K. governments would reportedly receive special shares in a combined firm, replacing the existing U.K. government share in BAE and stakeholder concert party arrangements in EADS.

The two companies are partners in the Eurofighter jet and BAE used to own a stake in EADS’ Airbus subsidiary, later selling it in 2006 to focus on the defense business.

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