Wednesday, January 20, 1999 Published at 12:33 GMT
Business: The Company File
Ill wind blows over BAe-GEC deal
The GEC deal will create Europe's largest defence firm
Unrest appears to be growing over the UK defence merger that will unite British Aerospace (BAe) and GEC Marconi.
Downing Street has denied reports Prime Minister Tony Blair has been critical of the deal and would have preferred the much-anticipated tie-up of major EU defence contractors to challenge US domination of the industry.
A spokesman for Mr Blair said the prime minister was hopeful talks between UK and continental companies would continue.
However, in Europe there is clearly ill-feeling over the UK tie-up that looks like scotching such hopes.
"Talks between us and transatlantic companies have intensified very recently and we are also talking to other European defence firms," a Dasa spokesman said. "We cannot exclude a race with BAe to consolidate on the European market."
Meanwhile, French company Thomson CSF has also criticised the arrangement after it had proposed a merger with GEC's Marconi.
The prospect of GEC and BAe joining forces emerged when GEC announced in December it would split off its Marconi defence arm from its electronic businesses, creating an opening for BAe.
There is also speculation the merger might be referred to the UK Monopolies and Mergers Commission.
BAe shares bounced back from Tuesday's slide after the merger announcement and were 22 pence, or 5%, higher at 447p by 1240 GMT. GEC was down 22 at 524p.
Combined sales at the new company will total £12.5bn and it will employ 99,000 people worldwide, the majority in the UK.
It means the UK has a defence company capable of competing with its American rivals.
A spokesman for BAe said he could not rule out job losses.
BAe chairman Sir Richard Evans said: "This merger represents an important step in the restructuring of the aerospace and defence industry in Europe.
Under the deal, GEC shareholders will receive shares in the enlarged company, called New British Aerospace, owning around 37% of the enlarged business.
GEC chief executive Lord Simpson said the merger was a win-win deal for shareholders, giving them a stake in the enlarged BAe and a more focused GEC.
Union leaders are to seek urgent talks. They hope that the multi-billion pound link-up will not lead to huge job losses.
A series of meetings will be held at the scores of British Aerospace and Marconi plants across the country to give workers details.
The giant new company's staff will range from Trident submarine workers in Barrow-in-Furness to Airbus workers in Chester and Bristol.
Although cost-cutting was not the main objective of the deal, the two companies said the merged group would be able to make cost-savings of around £275m over the next three years.
A Marconi spokesman said redundancies could not be ruled out but added that he believed any job losses will be minimal.
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