Wednesday, October 10, 2012

EADS-BAE: This Deal Couldn't Fly

Right from the get-go, I never thought that this deal should fly, most especially for the BAE shareholders. Today, the Wall Street Journal reports that it has officially been put into the dustbin of failed deals.

We came at it from the bad economics of the deal structure, and the cobbling together of two businesses that had no real synergies, despite protestations to the contrary, especially by the EADS management.  Reading an occasional commentary on the negotiations, probably the most unappealing factor facing a combined business would have been the presence of sovereign shareholder representatives on a governing board.  It would have been impossible to achieve efficient governance over things like capital allocation and utilization of production facilities for the combined companies with representatives of European governments on the combined board.  

BAE shareholders should raise a toast to Invesco Perpetual's taking the lead on airing these issues.

No comments: