BRUISED BAE Systems stepped up efforts to reassure staff, customers and investors yesterday in the wake of its abandoned attempt to merge with EADS.
In a letter published in national newspapers, BAE chairman Dick Olver and chief executive Ian King said the defence giant did not “regret” the failed bid, which would have created a company with combined sales of £60bn.
The decision to ditch the proposal has left many fearful over BAE job security, while others believe the FTSE 100 group is now more vulnerable to a takeover.
But in their joint notice, Olver and King said they were confident the company can make progress and “prosper in the future”.
After days of political wrangling, the two companies were forced to scrap the plans after German opposition scuppered the £28bn deal.
The tie-up would have improved BAE’s exposure to commercial markets – as EADS is an Airbus aircraft manufacturer – in a climate when public defence spending is declining.
BAE, which operates in 50 UK locations, including two in the North East, reported a 14% fall in sales last year as military spending in the US and UK was cut. It is cutting costs in some areas and is to shut its Vickers factory in Newcastle with the loss of 300 jobs, and is to shed 100 jobs in Washington, but will still have around 300 staff in the region.
In the letter, Olver and King said: “We felt as a company and a board that bringing BAE Systems and EADS together would create a business that was even better than the sum of its parts.”
They added that the new business would have been able to “access new markets” and “ride the cycles of defence spending and civil aircraft demand more smoothly”.
The letter was published as BAE released a trading update reassuring that the UK defence environment “remains stable” but warned there was uncertainty surrounding the future of US spending.
Olver and King added in their letter: “We have a supremely skilled and talented group of employees working at the cutting edge of technology. We are creating value for our shareholders, for the economies in which we operate and the communities in which we work.”
Unions, defence analysts and Labour politicians all raised concerns about the abandoned deal and said the merger would have created a stronger company and guaranteed jobs in the long term.
Germany is understood to have dealt the final blow to the troubled deal amid reports that chancellor Angela Merkel opposed the merger.
France has a direct stake in EADS, while German influence is held through a 22% stake owned by car maker and industrial group Daimler. Merkel and her government are thought to have insisted on a 9% stake in the enlarged group to match France’s holding.