BAE and EADS discuss possible merger

Arlington, Va., 13 Sept 2012. BAE Systems and EADS are now in discussions about a possible combination of the businesses. The potential combination would create a world leading international aerospace, defence and security group with substantial centers of manufacturing and technology in the UK, USA, France, Germany and Spain as well as in Australia, India and Saudi Arabia.

This potential combination would be implemented through the creation of 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.

Under the transaction structure being discussed between the parties, BAE Systems and EADS envisage that certain defense activities would be ringfenced with governance arrangements appropriate to their strategic and national security importance, particularly in the USA, given the importance of that market to the enlarged group. In addition, subject to receiving appropriate shareholder approvals, the parties envisage issuing special shares in BAE Systems and EADS to each of the French, German and UK governments to replace the existing UK government share in BAE Systems and the stakeholder concert party arrangements in EADS.

The two companies hope that if they combine it will provide long term financial stability and an extended market presence, which will enable them to compete even more effectively on the world stage.

Any agreement on the terms of a potential combination will require approval by the Boards of both BAE Systems and EADS, and would be subject to a number of governmental, regulatory and shareholder approvals. There is no certainty at this stage that the discussions will ultimately lead to a transaction.

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