Paul Phelan/CAIRNS

BRITISH AEROSPACE Australia is close to acquiring control of rival Australian defence contractor AWADI, the defence-business unit of AWA. Negotiations now in progress apparently surround warranty questions and bank guarantees relating to continuity of existing contracts.

The move would be wholly consistent with the "strategy of mergers and acquisitions" launched by new BAe Australia chief executive Robin Southwell late in 1995, with a strategic goal of a A$1billion ($770 million) turnover. Finalisation of the deal, has been delayed by prolonged negotiation and an unexpected AWADI share purchase by BTR Nylex, which markedly lifted share trading.

Sources close to the negotiation say that rivalry between the two companies has lately limited their ability to compete meaningfully in regional markets, with neither able to attain the stature to bid for major projects as a prime contractor.

Current AWADI business includes a A$60 million upgrade of the Royal Australian Air Force's (RAAF's) Lockheed Martin P-3 Orions, and the development of the Nulka hovering rocket anti-ship missile decoy system for the Australian and US navies. AWADI and BAe have also teamed on the project to supply the RAAF with the Hawk 100 as a lead-in fighter, and with Westland for the supply to the Australian and New Zealand navies of support helicopters.

A merger would enhance BAe's ability to market the Nulka in the UK to replace (or to provide a payload for) the Royal Navy's SIREN decoy system. It would also strengthen its prospects in another forthcoming major defence contract - the RAAF's A$1 billion requirement for advanced early warning and control aircraft.

BAe Australia employs about 800 people, with sales in 1995 of about A$80 million. AWADI employs 700 staff and 1995 sales totalled A$138 million, delivering a pre-tax profit of A$1.84 million.

Source: Flight International