BAE bids to reassure staff

Secretary of State for Defence Gavin Williamson. Pictute: LPhot Ioan Roberts

Defence secretary refuses Treasury demands for military cuts

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BRUISED BAE Systems stepped up its efforts to reassure staff, customers and investors in the wake of its abandoned attempt to merge with EADS.

In a letter, BAE chairman Dick Olver and chief executive Ian King said the defence giant did not ‘regret’ the failed bid, which would have created a company with combined sales of £60bn.

The decision to ditch the proposal has left many fearful over BAE job security, while others believe the FTSE 100 group is now more vulnerable to a takeover bid. But in their joint notice, Mr Olver and Mr King said they were confident the company can make progress and ‘prosper in the future’.

After days of political wrangling, the two companies were forced to scrap the plans after German opposition scuppered the £28bn deal.

The tie-up would have improved BAE’s exposure to commercial markets – as EADS is an Airbus aircraft manufacturer – in a climate when public defence spending is going down.

BAE, which operates in 50 locations including Portsmouth, reported a 14 per cent fall in sales last year as military spending in the US and UK was cut.

In the letter, Mr Olver and Mr King said: ‘We felt as a company and a board that bringing BAE Systems and EADS together would create a business that was even better than the sum of its parts.’ They added the new business would have been able to ‘access new markets’ and ‘ride the cycles’ of defence spending and civil aircraft demand more smoothly’.