EADS Snubs Last-Minute BAE Offer For Jet-Fighter Bid Role - Source - WSJ.com
LONDON (Dow Jones)--European Aeronautic Defence & Space Co. (EAD.FR) has snubbed a last-minute approach by its Eurofighter Typhoon partner BAE Systems PLC (BA.LN) to become a joint prime bidder for an estimated $10-billion Indian air-force jet deal, a person familiar with the matter said.
India may shortly make a decision on replacing its ageing air arm with 126 new fighter jets. Dassault Aviation S.A.'s (AM.FR) Rafale fighter jet and the Eurofighter Typhoon are the two remaining aircraft in contention.
The person said that BAE Systems had approached EADS whose Germany-based Cassidian unit is a prime bidder.
EADS had been "flattered" but had "politely" declined to bring BAE into the bidding process at such a late stage, the person said. EADS had already taken the majority of the risk to get to the final stages of bidding and negotiating work-share terms, the person noted. EADS has determined the levels of production that could potentially be done within India itself. Levels of technology transfer and possible investment in the country, known as offset, are also part of the negotiations.
BAE Systems had no comment on the possibility of a joint-prime bid for the Indian contract but noted its role within the Eurofighter consortium.
"Bids for the Indian MMRCA (Medium Multi-Role Combat Aircraft) competition were submitted in the third quarter of 2011 supported by BAE Systems and the other Typhoon partners," a spokesman for the U.K. defense group said.
The Eurofighter consortium is made up of BAE Systems, Italy's Finmeccanica SPA (FNC.MI) and EADS. Different members of the consortium have taken the lead in bidding for possible contracts with government customers. Prime bidders can expect a larger share of the future benefits of a successful deal than other consortium partners.
BAE was the prime bidder for order with Japan but lost out in late December to Lockheed Martin Corp.'s (LMT) F-35 Lightning II Joint Striker Fighter. BAE Systems is also prime bidder for contracts in Malaysia and Qatar and has previously secured a Typhoon order from Saudi Arabia.
Earlier this year, the British company said it hadn't yet agreed with Saudi Arabia the next stage of the country's Typhoon order and that a "significant cash payment," which analysts estimated at GBP500 million, would be deferred until negotiations were completed. That raised concerns BAE wouldn't be able to meet a forecast of stable 2011 underlying earnings a share compared with the previous year.
Under the 126 Indian fighter-jet order, the first 18 jets will be bought in "fly-away" condition and the remainder will be produced with the selected vendor in India.
--Kaveri Niththyananthan, Dow Jones Newswires; 4420 7842 9299;
kaveri.niththyananthan@dowjones.com
