Giant defence merger set for clearance

Date: 04/05/2000

By Renée Cordes

EU ANTI-TRUST regulators are expected to clear plans to create Europe's largest aerospace company - the European Aeronautic, Defence and Space Co. (EADS) - next week, putting the merged firm on track for a public share sale by the end of July.

Analysts say that although the companies involved have overlapping interests with, for example, joint ventures in missiles and joint control over the Eurofighter - the largest-ever European military aircraft procurement programme - the European Commission is under too much pressure from governments involved to block the mega-deal.

The Commission is due to deliver its verdict on the merger of Germany's DaimlerChrysler's aerospace unit Dasa, France's Aerospatiale Matra and Spain's Construcciones Aeronauticas (CASA) by next Thursday (11 May). Officials extended the orginal 27 April deadline for completing their routine, one-month investigation by two weeks last month after the companies offered concessions to meet competition concerns.

Commission officials declined to reveal details of these undertakings until after the institution has announced its decision. But industry insiders said they are unlikely to attach any major conditions to their approval of the deal to avoid an all-out battle with the governments involved.

"There is too much politically at stake," said Adam Collins, an analyst at Dresdner Kleinwort Benson in London. "There are obvious overlaps in some pan-European ventures and some kinds of missiles, but it would be difficult to disentangle these just to satisfy regulators' concerns. We would be surprised if there were any major strings attached."

Experts also point out that the companies involved have already moved to address competition concerns in the space sector, in accordance with the recent Commission decision to approve the Astrium joint venture between Matra Marconi Space and Dasa. The EU executive cleared that deal early last month after the two firms agreed to eliminate overlaps in the production of wheels and propulsion systems used in satellite controls.

Analysts say competition concerns are already being addressed in this area and that this should contribute to a favourable Commission decision on EADS.

But even if regulators do clear the mega-defense merger as expected, industry insiders warn that officials will keep a close watch on future ventures planned by EADS.

Last month, EADS and Finmeccanica signed an agreement to create a joint venture company in the field of military and civil aircraft, which is due to be implemented by the end of this year.

In addition, Dasa executives have called on the German government to approve the further development of the Airbus consortium's new A3XX super-jumbo airline quickly.

EU anti-trust regulators are expected to clear plans to create Europe's largest aerospace company - the European Aeronautic, Defence and Space Co. (EADS) - next week, putting the merged firm on track for a public share sale by the end of July.