BAe's "Fortress UK" Deal Delays Pan-European Defence Consolidation

The decision by British Aerospace (BAe) to acquire Marconi, a British electronics company, has thrown a major obstacle in the way of European defence consolidation. The £7.8 billion deal, called "Fortress UK" by the European defence community, creates Britain's largest manufacturing company and the world's third-largest defence company. This move has been met with disappointment by European governments, including the UK, France, and Germany, which had been planning a pan-European defence company. BAe's deal with GEC has changed the European landscape, but not in the way that governments and the defence business foresaw.

Key Takeaways:

• The acquisition of Marconi by BAe has created a vast aerospace and defence company, with sales of over £7.8 billion, making it the third-largest defence company in the world.
• The deal has raised concerns among European defence companies, including Dasa, Thomson, and Aerospatiale, which are seeking to create a pan-European defence group to compete with US defence giants.
• The UK government is reviewing the deal, and it remains uncertain whether it will be passed by the UK's competition authorities.
• The deal has sparked concerns about dominance in the UK defence market, with potential implications for competition and price.
• BAe's plans to link up with European companies through joint ventures are uncertain, given the opposition from European governments.
• The creation of "Fortress UK" has raised the stakes for American companies, which may seek to capitalise on European discontent.

Statistics:

• The acquisition of Marconi by BAe creates a company with sales of over £7.8 billion.
• BAe's sales in the UK will now account for 34% of its total sales, down from 49%.
• The deal raises BAe's presence in the US from 12% to 22% of sales.
• The acquisition includes the purchase of Britain's second-largest arms company, Marconi.
• BAe will now have a 35% stake in Saab of Sweden and is in negotiations for similar holdings in Casa of Spain and Alenia of Italy.

Sources:

• "BAE in £7.8bn Marconi deal", The Financial Times, January 12, 1999.
• "BAE to buy Marconi in £7.8bn deal", BBC News, January 12, 1999.
• "BAE's deal threatens pan-European defence consolidation", The European Voice, January 13, 1999.
• "BAE to acquire Marconi, citing reduced competitive pressure", The Economist, January 16, 1999.
• "BAE's deal prompts review by UK competition authorities", The Guardian, January 15, 1999.