Collapse of BAE, EADS Merger Stalls Downsizing of Defense Industry

October 11, 2012

A new round of consolidation in the defense industry does not appear to be on the horizon now that the $45 billion merger of BAE systems and EADS has fallen apart, analysts say.

The deal between BAE and EADS would have created the world’s largest defense and aerospace company and likely spurred rivals to assess their own merger opportunities.

“This merger means a lot less for the U.S. market because it collapsed,” said Loren Thompson, a defense analyst for the Lexington Institute who advises BAE and some of its competitors.

“If it had gone forward, it would have put pressure on big U.S. defense contractors to get into the consolidation process, but now that pressure is removed,” Thompson said.

The end of the talks between BAE and EADS also could signal the end of a push in Europe to create a massive European defense-aerospace firm that would compete with Boeing and Lockheed Martin across the globe.

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