Editing BAE Systems (section)

===Formation===
The 1997 merger of American corporations [[Boeing]] and [[McDonnell Douglas]], which followed the formation in 1995 of [[Lockheed Martin]], the world's largest defence contractor, increased the pressure on European defence companies to consolidate. In June 1997, British Aerospace Defence managing director [[John Weston (businessman)|John Weston]] commented "Europe&nbsp;... is supporting three times the number of contractors on less than half the budget of the US."<ref>{{Cite news |first=Andrea |last=Rothman |last2=Landberg, Reed |title=Europe Defense Firms Feel Pressure to Unite |url=https://archive.seattletimes.com/archive/19970615/2544541/europe-defense-firms-feel-pressure-to-unite |work=The Seattle Times |date=15 June 1997 |access-date=12 September 2007 |archive-url=https://web.archive.org/web/20110519105921/http://community.seattletimes.nwsource.com/archive/?date=19970615&slug=2544541 |archive-date=19 May 2011 |url-status=live}}</ref> European governments wished to see the merger of their defence manufacturers into a single entity, a "European Aerospace and Defence Company".<ref>{{cite news |title=Business: The Company Filed Defence merger on the radar |url=http://news.bbc.co.uk/1/hi/business/the_company_file/130305.stm |work=BBC News |date=10 July 1998 |access-date=15 September 2007 |archive-url=https://web.archive.org/web/20051124122609/http://news.bbc.co.uk/1/hi/business/the_company_file/130305.stm |archive-date=24 November 2005 |url-status=live}}</ref>

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.<ref>{{Cite news |first=Adam |last=Jones|title=Europe cries foul as New BAe emerges |work=[[The Times]] |location=UK |date=20 January 1999}}</ref> The two companies envisaged including Aérospatiale, the other major European aerospace company, but only after its privatisation.<ref>{{Cite news |first1=Pierre|last1=Sparaco|last2=Morrocco |first2=John D. |title=French Government Grapples With Aerospace Strategy |work=Aviation Week and Space Technology |publisher=McGraw-Hill |date=30 June 1997}}</ref> The first stage of this integration was seen as the transformation of Airbus from a consortium of British Aerospace, DASA, Aérospatiale and [[Construcciones Aeronáuticas|Construcciones Aeronáuticas SA]] into an integrated company; with this aim British Aerospace and DASA were united against the various objections of Aérospatiale.<ref name="BAeDASArelations">{{Cite news |last=Gray |first=Bernard |last2=Skapinker |first2=Michael |date=24 June 1997 |title=Giant waiting in the wings: Bernard Gray and Michael Skapinker ask if Europe's defence industry can consolidate in time to challenge US dominance |work=Financial Times}}</ref> 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.<ref>{{Cite news |title=BAe and Dasa discuss proposals for merger: Aerospace groups still have 'important issues to resolve'|work=Financial Times |page=1 |date=24 July 1998}}</ref> A merger was agreed between British Aerospace chairman [[Richard Evans (businessman)|Richard Evans]] and DASA CEO [[Jürgen E. Schrempp|Jürgen Schrempp]].<ref name="ftBAeDASA">{{Cite news |first=Peter |last=Spiegel|title=The largest aerospace companies gather next week for the Farnborough air show but the event will be without its long-time unofficial host|work=Financial Times|page=11|date=17 July 2004}}</ref>

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'' 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."<ref>{{Cite news |first=Russell|last=Hotten |title=GEC confirms Simpson job|work=The Independent |location=UK |publisher=Newspaper Pub |page=17|date=19 March 1996}}</ref> 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.<ref>BAE Systems Annual Report 1999 22. BAE Systems plc (2000).</ref> Evans stated in 2004 that his fear was that an American defence contractor would acquire MES and challenge both British Aerospace and DASA.<ref name="ftBAeDASA"/> 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",<ref>{{Cite news |first=Louise|last=Nevill|title=BAe and Marconi moving toward merger|work=The Scotsman |location=UK |publisher=The Scotsman Publications|page=17|date=4 January 1999}}</ref> for example combining the manufacturer of the Eurofighter with the company that provided many of the aircraft's electronic systems; British Aerospace was MES's biggest customer.<ref>{{Cite news |title=Speculation Rises on GEC Merger |work=The Scotsman |location=UK |publisher=The Scotsman Publications |date=28 December 1998}}</ref> 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]].<ref>{{cite news|url=https://www.theguardian.com/business/2000/jul/24/baesystemsbusiness|title=Airbus feud threatens UK jobs|date=24 July 2000|newspaper=The Guardian|access-date=2 March 2019|archive-url=https://web.archive.org/web/20190306044647/https://www.theguardian.com/business/2000/jul/24/baesystemsbusiness|archive-date=6 March 2019|url-status=live}}</ref>

Seventeen undertakings were given by BAE Systems to the [[Department of Trade and Industry (United Kingdom)|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 "[[Chinese wall|firewalling]]" of former British Aerospace and MES teams on defence projects such as the [[Joint Strike Fighter program|Joint Strike Fighter]] (JSF). In 2007 the government announced that it had agreed to release BAE Systems from ten of the undertakings due to "a change in circumstances".<ref>{{Cite news |title=UK Releases BAE SYSTEMS From Undertakings For Marconi Electronic Merger |work=Defense Daily International |date= 9 February 2007}}</ref>

BAE Systems inherited the UK government-owned [[golden share|"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 (law)|Articles of Association]] without the permission of the Secretary of State.<ref name="compcomm">{{cite web |url=http://www.competition-commission.org.uk/rep_pub/reports/1991/fulltext/296c2.pdf |title=BAe and Thomson-CSF SA: A report on the proposed merger |access-date=8 December 2005 |date=6 February 1991 |publisher=[[Competition Commission]] |archive-url=https://web.archive.org/web/20060214161332/http://www.competition-commission.org.uk/rep_pub/reports/1991/fulltext/296c2.pdf |archive-date=14 February 2006 |url-status=usurped}}</ref> These Articles require that no foreign person or persons acting together may hold more than 15% of the company's shares.<ref>{{cite web|url=https://investors.baesystems.com/shareholder-information/foreign-shareholding/2012|title=Individual Foreign Shareholding Restrictions|publisher=BAE Systems|access-date=25 February 2018|archive-url=https://web.archive.org/web/20171030140959/http://investors.baesystems.com/shareholder-information/foreign-shareholding/2012|archive-date=30 October 2017|url-status=live}}</ref>