Under fire

13 September 2012 By Quentin Webb

Investors seem to think EADS plus BAE is worth $4 bln less than the two companies alone. That’s not how mergers should work. That reaction may be punishment for springing a surprise – and one that will create a major stock overhang. An already complex merger is getting trickier.

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Shares in BAE Systems closed at 363.3 pence on Sept. 13, while shares in prospective merger partner EADS closed at 25.145 euros. That corresponds to a 3.1 percent gain for BAE over the past two sessions, and a 15.3 percent fall at EADS. Barry Norris at Argonaut Capital Partners, which holds 500,000 EADS shares, said the deal was “without logic and without winners. The whole of the proposed combination is inferior to the sum of the parts.” London-based Argonaut says it manages about 1 billion euros of assets.

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