Dasa remains prime target for BAe merger

BRITISH AEROSPACE is pressing ahead with talks aimed at clinching a pounds 15bn merger with Dasa, the German defence giant, with a further link- up with GEC's defence electronics business Marconi, as a secondary target.

However, there were strong indications yesterday that the French defence group Thomson CSF is keen to link with GEC, a late entrant to the drive for consolidation in the European defence industry.

Negotiations aimed at that consolidation have been overshadowed by the political concerns of the countries involved.

Tony Blair, the Prime Minister, has given his strong backing to an Anglo- German merger, whilst the French would also like to have a role.

Thomson CSF's overtures to GEC are seen by analysts as a serious threat to a deal between BAe, Dasa and a Marconi division demerged from GEC.

The French stockmarket took the prospect of a link between GEC's Marconi and Thomson-CSF seriously yesterday, as Thomson's share price climbed nearly four percent in thin volume.

Thomson was up 3.98 per cent at 235 francs. The blue-chip CAC-40 index was up 0.3 per cent at 3,903.07 at the time.

Observers are also taking a possible link between GEC and Lockheed Martin of the US seriously. Other parties talking to GEC include Northop Grumman of the US.

The BAe/Dasa link up, if successful, is set to have a British chief executive, with BAe's John Weston maintaining his role.

George Rose, BAe's finance director, will also remain in the same job.

The new grouping will be run on typically continental lines with a revolving chairmanship, although a German is likely to have first go in the top job.

Sir Richard Evans, BAe's current chairman, will continue to have a role in the new group.

Ownership of the merged entity is still under intense negotiation.

It appears that Dasa will emerge as the single biggest unified shareholder with around 25 per cent to 30 per cent of the group, making Dasa's owner DaimlerChrysler a key player in any further deals.

The rest will be spread between BAe's existing institutional investors. Dasa would have about a third of the seats on the board.