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Dasa and BAe to merge
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October 12, 1998: 5:20 a.m. ET
Market positive on Daimler-Benz and British Aerospace deal
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LONDON (CNNfn) - Shares of Daimler-Benz soared Monday on reports that the firm was ready to merge its aerospace division with British Aerospace. Bae shares also rose sharply.
The Financial Times reported BAe and Daimler-Benz Aerospace of Germany plan to merge next year in a move designed to create a pan-European defense contractor to challenge the might of giant American defense contractors Boeing and Lockhead.
Daimler-Benz shares jumped 10.2 percent to 120.7 DM in morning trade while British Aerospace's were up 10.11 percent at 387.75p. The two companies' sales last year totaled $22.9 billion.
The deal could mean the end of three-way merger between BAe, Dasa and Aerospatiale/Matra of France. Aerospatiale is part-owned by the French government but BAe and Dasa have not wanted it as a shareholder in the new company. Delays to its full privatization have dogged the year-long negotiations.
BAe and Dasa are expected to set up a holding company to combine their interests, according to the FT. It is likely to be established as a Dutch company for tax reasons, probably with a representative from Aerospatiale on the board of the new company with a view to full merger later.
A British Aerospace spokesman told the FT: "We are in discussions with Dasa but equally we are talking with other European partners about a European aerospace defense company. It's obviously well known that we do share very similar positions (with Dasa) on the creation of the company."
Dasa, whose sales were DM 15.3 billion ($9.3 billion) in 1997, is the aerospace division of Daimler-Benz. British Aerospace's annual sales topped £8bn ($13.6 billion) last year.
Traders also said the market's interest in Daimler was also boosted by reports over the weekend that German telecoms group Mobilcom AG wanted to buy Debitel, the car maker's fast-growing information services venture. Daimler denied it wanted to sell Debitel.
Daimler is set to complete its merger with Chrysler Corp. next month. 
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