Disposal would revive possible tie-up with Boeing, which was reluctant to enter submarine and shipbuilding sectors

News that BAE Systems may sell its shipbuilding business has sent the company's shares climbing, with a transatlantic merger now seen as possible once again. The company said last week that it was considering selling off the three shipyards.

Earlier this year, Boeing chief executive Harry Stonecipher ended speculation about a merger with BAE, saying: "I am not interested in the submarine or shipbuilding business" - a setback to BAE chief executive Mike Turner's long-held ambition to link the company with a US prime contractor.

General Dynamics is believed to be interested in the Barrow submarine yard, while UK VT Group and Thales are interested in the two surface shipyards. Vosper Thornycroft has already responded to BAE's invitation for expressions of interest in the businesses, industry sources say. BAE says it is reviewing its options "including the retention or sale of some or all of these businesses". The UK Ministry of Defence says: "Clearly, important naval capabilities, including nuclear submarine building, must remain in the UK."

Industry insiders believe that the talk of the disposals may be connected to acrimony between the MoD and BAE over the CVF aircraft carrier programme. The ministry originally said BAE Systems was to act as prime contractor, while rival bidder Thales would provide the design and take about 33% of the work. But with contract awards due this month, the ministry now says: "We are still negotiating on how the alliance will work - how it will be structured." It adds that its procurement plans present "a huge opportunity for UK industry, but it must improve its productivity".

One observer says: "The timing of the sale announcement is very interesting. It could be a ruse to strong-arm the MoD." BAE warned in December that the carriers could cost £4 billion ($7.1 billion) rather than the £2.8 billion which the MoD originally wanted.



Source: Flight International