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Invesco's role in collapsed air deal
Published 11/10/12

A MULTI-BILLION pound merger that was criticised by one of Henley’s biggest employers has collapsed.

Defence giant BAE Systems, of which Henley investment firm Invesco Perpetual is the largest shareholder, was hoping to complete the £27.9 billion deal with the European Defence and Space Company yesterday.

But with the British, French and German governments unable to agree on their stake in the new company, and amid strategic concerns from investors, BAE scrapped the plans at the 11th hour.

It is believed that German Chancellor Angela Merkel, who is standing for election next year, was also uncomfortable with the deal.

This week, Invesco issued a statement criticising the merger and warning that it could have dire consequences for investors.

The company, which has a stake of 13.3 per cent in BAE, feared the deal could jeopardise the security firm’s “unique and privileged position” within the US market.

It was also worried that the new company, which the French and German governments wanted a high degree of control over, would be driven by political considerations.

Invesco said it had “significant reservations regarding both the proposal and its impact on long-term value for BAE shareholders”.

It said BAE was performing far better on its own than EADS, offering “superior cash generation” and more than double the dividends for investors.

In the run-up to yesterday’s deadline, there was disagreement between the governments over the details of the merger.

The Germans made surprise demands for the company’s headquarters to be based in Munich. It was originally expected that they would be split between Farnborough, where the military wing would be housed, and a civil aviation hub in Toulouse.

There was also opposition from the British government. Forty-five Conservative MPs wrote to David Cameron urging him not to let France or Germany have a stake If the deal had gone through, it would have been the world’s biggest arms and aviation merger.

In the final two days of the crisis, Invesco said it was entering discussions with both the board of BAE and other shareholders.

It holds 432,329,428 shares in BAE Systems and 3,846,899 in EADS, of which the majority are held by Invesco Perpetual Henley. The remainder are held by parent company Invesco.

Published 11/10/12

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