EADS chief Enders closer to goal of BAE takeover

For more than a decade, Tom Enders, the German head of European aerospace giant EADS, has dreamt of a united European aerospace industry strong enough to take on US behemoths. With the proposed blockbuster tie-up with Britain's BAE Systems, he may be closer than ever. Enders and his director of strategy Marwan Lahoud held secret talks over several months with BAE to create a aerospace and defence giant on equal footing with the likes of Boeing and Lockheed Martin. The takeover would create the world's biggest aerospace and defence group, uniting the maker of Airbus passenger jets with the builder of Eurofighter/Typhoon fighters, in a deal worth $48 billion at the time of announcement on Wednesday. But markets, sceptical that self-interested governments would loosen their grip on industrial champions, sent the share price for both companies down sharply as soon as the deal was announced, although BAE shares have recovered. The deal, if completed, would leave EADS with a 60 percent share to BAE's 40 percent, and governments in France, Germany and Britain with special rights, although reports said BAE insists on keeping states out of corporate decision making. Enders and Lahoud are veterans of the tectonic shifts that shook the defence industry in the 1990's when European companies scrambled to keep up with US mega mergers that made Lockheed Martin a giant and saw Boeing combine with McDonnell Douglas. To fend off the American onslaught, Enders, as head strategy of Deutsche Aerospace AG at the time, led intense talks to merge his group with BAE Systems, with the stated goal of inviting French partners to join later. But France backed away from the deal, unwilling to find itself a junior partner in a larger company. In the heat of the moment, French companies Aerospatiale and Matra merged on their own, in a deal negotiated by Lahoud, then of Aerospatiale. With BAE talks in tatters, Enders then turned to France's newly fangled Aerospatiale-Matra, and Mahoud, to create EADS (European Defence and Space Company) with Spanish CASA on board as well. "Tom Enders has always regretted not having succeeded in bringing BAE closer," a source close to Enders said. But he never left the goal fall out of sight. Enders knows everyone at BAE and kept in close contact. EADS and BAE cooperate on the Eurofighter combat plane as well as on missile technology through MBDA, a subsidiary co-run with Italy's Finmeccanica. And with his eye on BAE Systems, Enders also kept another goal in view: conquering the US market. Once the merger frenzy had cooled, BAE Systems pulled out of the civilian aerospace business virtually altogether, selling off its 20 percent stake in Airbus in 2006. But soon after the global financial crisis hit and Western governments slashed military budgets, leaving BAE Systems suddenly vulnerable. "Given their financial situation and the poor outlook in the defence sector, a part of the (BAE) management could have very well reconsidered its positions," said aerospace expert Philippe Plouvier from Roland Berger consultancy. After weeks of secret talks, BAE's head Ian King and his strategic director Kevin Taylor, reached a tentative deal with Enders and Lahoud in June and an EADS executive told AFP that officials from France, Germany and Britain began discussions in July. BAE Systems meanwhile told the US government of its plans as Enders activated his own network at the Pentagon to assuage any concerns from the US military establishment. "The first contacts with Washington have been rather positive," Lahoud said. For Tom Enders, it seems, "things have come full circle," said his close collaborator.