Defense merger: BAE to buy UDI
British defense company BAE has made a bid to purchase US company United Defense Systems (UDI) for almost $4 billion. UDI is the maker of Bradley fighting vehicles, missiles, artillery, and ship repair. In 2004, the company acquired Cercom, a supplier of ceramic armor to infantry troops.
BAE is Europe's largest defense contractor. It is involved in a wide swathe of defense specialties, including airplane design (Harrier, Hawk, Tornado, and Typhoon), armored vehicles (Trojan and Challenger), ships (including submarines), missiles, and space programs. It also owns 20% of European aircraft maker Airbus. The company recently acquired armored vehicle maker Alvis PLC and is working with Lockheed Martin to build the F-35 Joint Strike Fighter, the next generation US/NATO fighter plane. It's growing fast.
This would be a watershed deal as it is the largest acquisition of a US defense firm by a foreigner. It would also make BAE a close rival of the US's General Dynamics area of land-based systems.
Until now, the US military has been reluctant to buy from foreign-based suppliers. BAE is already the largest non-American contractor for the Pentagon; the new purchase would strengthen that position enormously. One of the biggest problems might be the issue of US arms embargos elsewhere in the world. For example, US relationships with the EU are complicated because of the EU's desire to sell defense systems to China against American policy.
Until now, defense seemed to be the one industry where US companies faced no meaningful competition from abroad. In the interests of preserving nation security, there's been a reluctance to let non-US companies have a say in what US troops can procure. But globalization may yet make the US a significant importer of military systems along with everything else.
8:21:24 PM 
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