EADS-BAE Merger Would Create Very Diverse Aerospace Company - Here's What It Would Produce

By @angeloyoung_ a.young@ibtimes.com on
A380 By Airbus
Airbus put a lot of hopes in its double-decker superjumbo, betting on Asian growth and an increase in long-haul flights to global hubs, but so far sales have not met expectations. Dubai-based Emirates Airlines has been by far the biggest customer. The aircraft, which first took flight in 2005 and was introduced to the market two years later, has also been wracked with wing cracking that has had to be rectified, as well as order cancellations in the current economic slowdown. Reuters

Two European aerospace giants are once again talking of a possible merger that if realized would create a $45 billion company with more than 200,000 employees. And it seems like nobody buying and selling stocks in either company thinks it's a good idea.  

Leiden, Netherlands-based European Aeronautic, Defence & Space Co., better known as EADS (EPA: EAD), is the more diverse of the two companies. It's involved in commercial and military aircraft and is the parent of Airbus, which shares pretty much all of the world's market for large jetliners with U.S.-based Boeing (NYSE: BA). It also provides civilian and military space systems support. The company's stock price closed down 10.2 percent to €25.16 ($32.53) on Thursday, its lowest price since mid-January.

London-based BAE Systems Plc (LON:BA) is focused primarily on defense as one of the world's top military contractors. It builds military aircraft, munitions, naval vessels and armored vehicles, including the Bradley that has been used by the U.S. since 1981. The company closed down 7.32 percent to €337, higher than prior to Thursday's afternoon's announcement that initially pumped up the stock price of both.

Analysts say the company that would come out such a merger would be very difficult to manage.

"This will be a very complex organization, and there is a risk of synergies coming only much later," Yan Derocles, an analyst at Oddo Securities in Paris, told Bloomberg.

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