Introduction
BAE Systems plc is a British multinational defence, security, and aerospace company. Its headquarters are in London in the United Kingdom and it has operations worldwide. It is among the world's largest defence companies; it was ranked as the third-largest based on applicable 2015 revenues. Its largest operations are in the United Kingdom and United States, where its BAE Systems Inc. subsidiary is one of the six largest suppliers to the US Department of Defense. Other major markets include Australia, India and Saudi Arabia. The company was formed on 30 November 1999 by the £7.7 billion merger of two British companies: Marconi Electronic Systems (MES) – the defence electronics and naval shipbuilding subsidiary of the General Electric Company plc (GEC) – and British Aerospace (BAe) – an aircraft, munitions and naval systems manufacturer.
BAE Systems is the successor to various aircraft, shipbuilding, armoured vehicle, armaments and defence electronics companies, including the Marconi Company, the first commercial company devoted to the development and use of radio; A.V. Roe and Company, one of the world's first aircraft companies; de Havilland, manufacturer of the Comet, the world's first commercial jet airliner; British Aircraft Corporation, co-manufacturer of the Concorde supersonic transport; Supermarine, manufacturer of the Spitfire; Yarrow Shipbuilders, builder of the Royal Navy's first destroyers; Fairfield Shipbuilding and Engineering Company, pioneer of the triple-expansion engine and builder of the world's first battlecruiser; and Vickers Shipbuilding and Engineering, builder of the Royal Navy's first submarines. Since its formation it has made a number of acquisitions, most notably of United Defense and Armor Holdings of the United States, and sold its shares in Airbus, Astrium, AMS and Atlas Elektronik.
BAE Systems is involved in several major defence projects, including the Lockheed Martin F-35 Lightning II, the Eurofighter Typhoon, the Astute-class submarine and the Queen Elizabeth-class aircraft carriers. BAE Systems is listed on the London Stock Exchange and is a constituent of the FTSE 100 Index.
Formation
The 1997 merger of American corporations Boeing and McDonnell Douglas, which followed the forming of Lockheed Martin, the world's largest defence contractor in 1995, increased the pressure on European defence companies to consolidate. In June 1997 British Aerospace Defence managing director John Weston commented "Europe... is supporting three times the number of contractors on less than half the budget of the U.S.". European governments wished to see the merger of their defence manufacturers into a single entity, a European Aerospace and Defence Company.
As early as 1995 British Aerospace and the German aerospace and defence company DaimlerChrysler Aerospace (DASA) were said to be keen to create a transnational aerospace and defence company. The two companies envisaged including Aérospatiale, the other major European aerospace company, but only after its privatisation. The first stage of this integration was seen as the transformation of Airbus from a consortium of British Aerospace, DASA, Aérospatiale and Construcciones Aeronáuticas SA into an integrated company; in this aim British Aerospace and DASA were united against the various objections of Aérospatiale. As well as Airbus, British Aerospace and DASA were partners in the Panavia Tornado and Eurofighter Typhoon aircraft projects. Merger discussions began between British Aerospace and DASA in July 1998, just as French participation became more likely with the announcement that Aérospatiale was to merge with Matra and emerge with a diluted French government shareholding. A merger was agreed between British Aerospace chairman Richard Evans and DASA CEO Jürgen Schrempp in December 1998.
Meanwhile, GEC was also under pressure to participate in defence industry consolidation. Reporting the appointment of George Simpson as GEC managing director in 1996, The Independent had said "some analysts believe that Mr Simpson's inside knowledge of BAe, a long-rumoured GEC bid target, was a key to his appointment. GEC favours forging a national 'champion' defence group with BAe to compete with the giant US organisations." When GEC put MES up for sale on 22 December 1998, British Aerospace abandoned the DASA merger in favour of purchasing its British rival. The merger of British Aerospace and MES was announced on 19 January 1999. Evans stated that in 2004 that his fear was that an American defence contractor would acquire MES and challenge both British Aerospace and DASA. The merger created a vertically integrated company which The Scotsman described as "[a combination of British Aerospace's] contracting and platform-building skills with Marconi's coveted electronics systems capability", for example combining the manufacturer of the Eurofighter with the company that provided many of the aircraft's electronic systems; British Aerospace was MES' largest customer. In contrast, DASA's response to the breakdown of the merger discussion was to merge with Aérospatiale to create the European Aeronautic Defence and Space Company (EADS), a horizontal integration. EADS has since considered a merger with Thales to create a "fully rounded" company.
Seventeen undertakings were given by BAE Systems to the Department of Trade and Industry which prevented a reference of the merger to the Monopolies and Mergers Commission. These were largely to ensure that the integrated company would tender sub-contracts to external companies on an equal basis with its subsidiaries. Another condition was the "firewalling" of former British Aerospace and MES teams on defence projects such as the Joint Strike Fighter (JSF). In 2007 the government, on advice from the Office of Fair Trading, announced it had agreed to release BAE Systems from ten of the undertakings due to "a change in circumstances".
BAE Systems inherited the UK government owned "golden" share that was established when British Aerospace was privatised. This unique share prevents amendments of certain parts of the company's Articles of Association without the permission of the Secretary of State.[8] These Articles require that no foreign person or persons acting together may hold more than 15% of the company's shares or control the majority of the board and that the CEO and the Chairman of BAE Systems must be British nationals.
British Aerospace's head office was in Warwick House, Farnborough Aerospace Centre in Farnborough, Hampshire. BAE Systems retains this but the registered office, and base for the senior leadership team, is in the City of Westminster.
Products
BAE Systems plays a significant role in the production of military equipment. In 2008, 95% of BAE Systems' total sales were military related.
It plays important roles in military aircraft production. The company's Typhoon fighter and Tornado fighter-bomber are both front line aircraft of the RAF. The company is a major partner in the F-35 Lightning II programme. Its Hawk advanced jet trainer aircraft has been widely exported. In July 2006, the British government declassified the HERTI (High Endurance Rapid Technology Insertion), an Unmanned Aerial Vehicle (UAV) which can navigate autonomously.
BAE Systems Land and Armaments manufactures the M2/M3 Bradley fighting vehicle family, the US Navy Advanced Gun System (AGS), M113 armoured personnel carrier (APC), M109 Paladin, M777 howitzer, the British Army's Challenger II, Warrior Tracked Armoured Vehicle, Panther Command and Liaison Vehicle, and the SA80
Major naval projects include the Astute-class nuclear submarine, Type 45 air defence destroyer and Queen Elizabeth-class aircraft carrier.
