EADS and BAE Systems in merger talks to create world's largest aerospace and defence company

A merger would create a combined annual turnover business of more than $95 billion with almost 75% being in aerospace – it would also give EADS a solid position in the lucrative US market.  

A joint statement to the Stock Exchange said: "BAE Systems and EADS have a long history of collaboration and are currently partners in a number of important projects, including the Eurofighter and MBDA joint ventures. The potential combination would create a world-class international aerospace, defence and security group with substantial centres of manufacturing and technology excellence in France, Germany, Spain, the UK and the USA."

BAE previously held a 20% stake in the aircraft manufacturer Airbus which it sold back to EADS in 2006.

The two companies have also been in talks with a number of governments about the implications of the transaction to "secure and sensitive defence businesses".

In a separate statement issued yesterday BAE said the partners would look to create a "dual-listed company structure", under which both companies would operate as one group "by means of equalisation and other agreements but would be separately listed on their existing exchanges". BAE Systems shareholders would own 40% and EADS shareholders 60% of the enlarged group, it said.