EADS, BAE campaign for merger support

EADS and BAE Systems, a week into announcing plans for a $45 billion (R375bn) combination, are starting to canvass investors who are doubtful a merger adds any value.

The companies had started briefing select groups of nongovernment shareholders to convince them of the merits of a deal, people familiar with the talks said yesterday.

EADS chief executive Tom Enders acknowledged yesterday that the announcement last Wednesday might have caught some shareholders off guard, causing a 12 percent stock drop since.

EADS and BAE are seeking to harmonise the interests of the UK, Germany, France and Spain, and to avoid alienating the US Department of Defense, BAE’s biggest source of sales.

“Long-term investors and hedge funds are scratching their heads a bit because it is not immediately clear what the benefits of this merger are,” RBC Capital analyst Robert Stallard said.

Among BAE’s biggest shareholders is Invesco, with a stake of 13.25 percent, while Blackrock and Axa each own just below 5 percent, the latest filings show. EADS has three main investors with Daimler, Lagardere, and the French government controlling 44 percent of the company, while the rest of its stock is freely traded.

Beyond a basic structure giving EADS investors 60 percent of the new company and those of BAE the rest, details of the merger remain unclear.

Saying he was encouraged with progress on the plan, Enders called EADS and BAE “a perfect fit” in a letter to employees yesterday. – Bloomberg