Friday, October 15, 1999 Published at 16:09 GMT 17:09 UK
Business: The Company File
BAe offered European merger
The new group will be involved in the Eurofighter project
British Aerospace may be invited to join the merger of two of Europe's biggest defence groups.
Lagardere, which, along with the French government, owns the majority of Aerospatiale-Matra, said BAe had been invited to take part in a future united Airbus firm, and a German official said he was "sure" talks would now take place for BAe to join in the full merger.
BAe is already involved in the Airbus passenger jet project along with Dasa and Aerospatiale.
The combined group will have sales of about 21 billion euros ($22.5bn) and employ more than 89,000 people.
If regulatory and competition authorities approve the link-up, the European Aeronautics, Defense, and Space Company (EADS) will start operations in the first half of 2000.
British Aerospace shares dropped 6% after the announcement, on fears that it would be isolated from European defence industry consolidation.
European companies already cooperate in building Airbus commercial planes and Eurofighter and Tornado military jets, but industry insiders fear that unless they pool their skills, finances and research more closely, they will be picked off by US firms keen to expand into European markets.
The European Commission is thought unlikely to to block the proposed merger between the two, European lawyers said. "This merger will have no difficulties," Mr Brian Hartnett, with the Brussels practice of US law firm Squire Sanders & Dempsey said.
Dasa's chief executive Manfred Bischoff had earlier said he did not anticpate the merger to encounter any problems with the European Commission.
DaimlerChrysler said EADS would be the world's second largest civilian aircraft manufacturer - after Boeing - through Airbus, and the world market leader through Eurocopter.
DaimlerChrysler Chief Executive Juergen Schrempp and Lagardere head Jean-Luc Lagardere described the agreement as a ground-breaking deal for consolidation of the European aerospace and defence industry and said it would enhance profitability.
"The merger will also enable DaimlerChrysler to lead from a position of strength which will result in a new dimension of profitable growth," Schrempp said.
Lagardere said: "Aerospatiale Matra looks forward to working together as part of the same company."
European defense ministers have long urged rival firms to join together, but national pride and state ownership (in the case of Aerospatiale) blocked the completion of the deal.
Frustrated by the lack of progress, British Aerospace then merged with the defence electronics arm of GEC, Marconi.
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