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

on September 13 2012 1:37 PM
  • Eurofighter Typhoon
    A Royal Saudi Air Force Typhoon fighter near the Malta international airport Dec. 9, 2010 airliners.net / Gordon Zammit
  • A400M By EADS
    Airbus Military’s A400M multirole airlifter is one of the high-profile Airbus aircraft that was showcased at the 2012 ILA Berlin Air Show. Airbus
  • A380 By Airbus
    A Singapore Airlines Airbus A380 sits parked at Charles De Gaulle International outside of Paris. Reuters
  • Hawk Jet Trainer By BAE
    A Hawk 132 being built at the Hindustan Aeronautics Limited (HAL) production line in Bangalore, India on Feb. 28, 2008 Ajai Shukla
  • Astute-Class Submarine By BAE
    An Astute-class sub rests on a ship lift in Barrow, UK, June 9, 2007 Creative Commons
  • ATV-4 Satellite By EADS
    An ATV satellite being assembled at the Astrium GmbH facility in Bremen, Germany, in 2012 Astrium / I. Wagner
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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.