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Friday, 14 April, 2000, 15:06 GMT 16:06 UK
Aero deal snub to BAE
The company will have a 63% stake in the Eurofighter
Italian defence and engineering firm Finmeccanica has agreed a joint venture with the European aerospace consortium EADS.

The news is a blow to the UK's BAE Systems, which had been hoping to link up with the company's military aircraft subsidiary, Alenia.

The 50-50 alliance with EADS, to be set up by the end of this year, would have annual sales of 2.5 billion euros (1.5bn) and would have 17,000 staff.

"The new company will have a leadership position in Europe in the military aircraft sector and an important activity in the aircraft structures," said a joint statement.

A key strength of the new joint venture will be the production of heavy combat aircraft, particularly the Eurofighter and Tornado jets. Together, EADS and Alenia control some 63% of Eurofighter. BAE holds a 37% stake.
Airbus planes
Finmeccanica has the option of joining Airbus

Finmeccanica also has the opportunity of joining the Airbus civil aircraft consortium.

It is 80% owned by the partners who are banding together to create EADS - DaimlerChrysler's aerospace unit Dasa from Germany, France's Aerospatiale Matra and Spain's Casa.

The remaining 20% is held by BAE Systems.

Finmeccanica has three years to exercise the option of taking a 5% stake.

Some observers see the deal as a serious knockback to BAE Systems.

But the British company said its strategy would not be undermined by the alliance.

It said it was an international player poised to benefit from future globalisation.

"We are the only European company that is truly big in the US and the only American company truly big in Europe," said BAE.

'Ideally placed'

"Clearly we believe we are ideally placed to take advantage of this globalisation."

Analyst Chris Avery of J P Morgan agreed, pointing out that the US research defence budget was 30 times Europe's total.

"As a US defence contractor, BAE will have access to a defence budget that will make Europe look like a backwater," he said.

"To stay at the forefront of the world you need access to as much as you can."

A deal with Finmeccanica would have provided a better European counterbalance for BAE, but strategically, the US was is more important.

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27 Oct 99 | The Company File
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