U.S. defense becomes more defensive investment 1 Oct 2013 Pressures on the U.S. deficit are taking a toll on makers of fighter jets and missiles. The likes of Lockheed and Northrop once focused on growth, but are now handing back more cash to shareholders. The trouble is their profile for investors is somewhat at Uncle Sam’s whim.
India new FDI rules show welcome long-termism 17 Jul 2013 Letting foreigners own more of local industries like telecoms won’t kick off a rush to invest. But it suggests a desire to court longer-term inflows, and replace an unhealthy reliance on hot money. The new policies may help stem the rupee’s slide too.
Economic asymmetry curses costly al Qaeda fight 21 May 2013 The Pentagon’s estimate of at least 10-20 more years of post-9/11 fighting layers extra gloom on already restrained U.S. and world GDPs. Military and related expenses all weigh on growth. The rewards look unbalanced for all but the defense industry compared to the combat tab.
EADS triumph obscures its cyclical vulnerability 27 Feb 2013 Europe’s top aerospace group is making investors forget the failed merger with BAE Systems. Having overhauled its governance, EADS is upping dividends and share buybacks. The standalone snapshot looks good. But this is still a cyclical business - that’s why BAE was on the agenda.
Finmeccanica woes show need for radical overhaul 12 Feb 2013 The arrest of Italian defence company chief Giuseppe Orsi for bribery could derail the group’s restructuring and debt-reduction plans. Political intrigue shouldn’t distract the next government from selling down its stake in Italy’s second-biggest employer.
Corporate governance: EADS 1 – France 0 6 Feb 2013 The French government couldn’t appoint its preferred candidate, Anne Lauvergeon, to the Airbus maker’s top spot. Instead, former Thales CEO Denis Ranque will get the job. EADS reformed governance after its failed merger with BAE. The new system seems to be working.
Flu epidemic exposes U.S. risk management flaws 14 Jan 2013 The virus kills about 36,000 Americans and inflicts $90 bln of economic damage annually. While one year’s death toll is 10 times greater than all terrorist attacks since 2000, the government spends far more on homeland security. Poor resource allocation can be a hard thing to cure.
Chuck Hagel is good choice for U.S. deficit hawks 8 Jan 2013 Obama’s pick for defense secretary mixes dovish foreign policy views - at least for a Republican - with budget-cutting fervor. The combination could actually slash Pentagon spending. Reducing it to the proportion of GDP seen in the late 1990s would save Uncle Sam $250 bln a year.
BAE needs a new chairman 12 Oct 2012 The UK defence company had to embrace the EADS deal because it was too weak to go it alone. Dick Olver, the chairman, must carry the can both for allowing BAE to slide and for poor management of the attempt to secure salvation-by-merger. Fresh leadership is required.
EADS can’t move if it doesn’t change. But can it? 10 Oct 2012 The Airbus maker couldn’t do a deal with BAE because of its skewed, politicised governance. CEO Tom Enders may have been over-optimistic in thinking the Franco-German group was a normal company. He still has work to do to convince the French and German governments to step back.
BAE must show standalone strength post-EADS 10 Oct 2012 An “in play” BAE may attract a low-ball bid. So the UK defence group must reassure investors. But there are few levers to pull. It has been cost cutting for years. And with defence budgets still shrinking, showering shareholders with cash does not look too wise.
BAE pays price for having no deal to sell 8 Oct 2012 The UK defence group’s lead investor has taken aim at the EADS merger. Finessing leaked deals is always tricky, and angry investors nowadays seem almost de rigueur for big M&A. Still, Invesco’s intervention shortens the odds on a BAE management clearout if the tie-up fails.
France’s silly stake obsession could kill BAE-EADS 8 Oct 2012 Germany, France and the UK could agree on the BAE-EADS merger if Paris didn’t insist on keeping a large stake in the joint company, confirming the fears of the deal’s opponents. The French government doesn’t seem to get that there are other ways to remain influential.
UK should foster not fear BAE-EADS tie-up 5 Oct 2012 Former Chancellor Alistair Darling says UK interests may suffer if France and Germany held sway over the defence merger. Britain certainly needs safeguards to protect national security. But these can be found. And the alternative - no deal - wouldn’t be in the national interest.
Executive rewards mustn’t distort M&A decisions 4 Oct 2012 Big retention packages for Xstrata’s CEO angered investors. Now there’s confusion over whether a tie-up with EADS would trigger a bonanza for BAE’s CEO. With the shareholder spring still echoing, companies must show windfalls at the top don’t distort decision-making.
EADS/BAE merger risks hitting political wall 1 Oct 2012 Lagardere, the media group owning 7.5 pct of EADS, adds to the uncertainty of the aerospace and defence merger by deeming it “unsatisfactory”. But the real obstacles are political. France and Germany must convince the UK, the three in turn have to win over the U.S. No small feat.
Franco-German politics first hurdle for BAE/EADS 25 Sep 2012 The two European defence and aerospace companies can’t merge unless Paris and Berlin settle their differences over governance and shareholdings. The tension is typical of EADS’ own complex political and economic history. The BAE deal offers a golden opportunity to clear the air.
Markets struggle with true values for Xstrata, BAE 20 Sep 2012 Shareholders try to find the right price in deals, but their perspective is too financial and short term. Besides, no price is right if a tie-up is basically wrong - overleveraged, undermanaged or self-destructive. Both Glencore-Xstrata and EADS-BAE might fail this basic test.
Boeing could play BAE-EADS spoiler on many fronts 19 Sep 2012 Europe’s $45 bln defense deal needs U.S. security clearance and perhaps a nod from Congress. Boeing wields enormous clout in Washington and has a history of using it against rivals. Valuations and looming military cuts also mean a bid for all or part of BAE can’t be ruled out.
Dual listing may hinder bets on BAE-EADS 18 Sep 2012 If the duo can agree on a $45 billion tie-up, that should be a godsend for thumb-twiddling merger arbitrageurs. But political and security hurdles abound. Moreover, plans to create a “dual-listed” successor add an extra layer of risk for any arbs backing the deal.