British Aerospace (BAe) has confirmed that it is in advanced talks with other parties on European defence/aerospace consolidation, fuelling speculation a bigbang merger with Germany's Dasa could be imminent.
After a wave of weekend press speculation, BAe said in a statement it was in discussions with certain unnamed groups, but added a final deal had not been nailed down yet.
"British Aerospace has been in discussions with other major industry participants, with a view to progressing the consolidation of the European aerospace and defence industry. Certain of these discussions are now at a relatively advanced stage. However, no definitive agreements have yet been reached," said BAe.
Despite the lack of direct reference to Daimler Chrysler Aerospace (Dasa), BAe's statement was enough to ignite share prices at both firms.
BAe's shares were up 4.5 per cent at 518p per share, after being up more than six per cent earlier. Daimler Chrysler was up 2.8 marks at 148.3 marks.
The surge reflected market hopes that the log-jam in European consolidation was close to being broken.
One London-based analyst said cost savings could run to around £200 million sterling per annum for the merged group, but warned a large chunk of that may have to be shared with customers.
Both firms refused to go beyond saying they held discussions as part of a wider industry debate on consolidation. Dasa and BAe also remained coy on the possible timing of a deal.
Analysts in both Germany and Britain said, while a deal was close, they believed it may not be finalised until next year.
British press reports say BAe will take a 65 per cent controlling stake in a new merged company worth £14 billion. But sources said Dasa was holding out for a merger of equals rather than being swallowed by its British rival.
The discussions also clash with European plans to overhaul Airbus - the four-nation aerospace consortium which includes BAe, Dasa, Aerospatiale of France, and Casa of Spain.
A row has erupted between the partners around whether the French are seeking to wrest control of the consortium.
Analysts hope that if Dasa and BAe move ahead, that could concentrate minds in France to step up the pace of their industry reform - allowing them to become part of any merger.
