EADS is keen to make defense acquisitions in the U.S.

EADS is keen to make “reasonable” acquisitions in the field of defense security and services in the U.S. over the next few years, Chief Executive Louis Gallois said over the weekend.
The U.S. has the largest defense budget in the world and EADS has been trying for years to win a bigger share of that market. Defense electronics and services are among the fast-growing areas.
EADS could look at assets closer to home, in France for instance, but the tendency of the government to get involved has acted as a powerful deterrent.
“You have seen the success of discussions between French companies to exchange their assets,” Gallois said at a press briefing on Saturday. He was alluding to the efforts of defense firms Safran and Thales to restructure their operations by swapping some units.
“We are not interested in a strategic move in France.”
The U.S., however, is a different matter and an altogether more tempting prospect.
“We want to be prime contractors there,” said Marwan Lahoud, chief strategy officer at EADS. “In order to gain this status, you need to detain key technologies.”
Some of these technologies could be acquired, specifically in the field of unmanned aerial vehicles, secured communications and defense electronics, though Lahoud stressed he doesn’t favor “the string of pearl approach” of making a flurry of small acquisitions.
Deals are on the agenda these days at EADS for several reasons. First because the company has the cash to afford it, second because the global economy is starting to recover and last but not least because the board — long hostile to deals — has recently turned more amenable to the idea of making “reasonable” acquisitions.
Gallois still believes in winning the tanker bid
Making acquisitions, however, isn’t the only path to success in the U.S.
The highest profile attempt by EADS to bolster its position across the Atlantic so far has been its dogged bid for the U.S. Air Force tanker contract, which has been the subject of much controversy.
EADS, which owns Airbus, and Boeing Co. are locked in a fierce battle for the contract to supply 179 refueling planes to replace the aging U.S. fleet of Boeing-built KC-135 tankers.
Earlier this month both companies filed their latest proposal. A decision between EADS’ bid, based on the A330 tanker, and Boeing’s, built around the 767 commercial jet, is expected later this year.
Gallois this weekend said he was confident the decision would be “fair,” adding that he was very satisfied with the treatment received from the Pentagon in the latest round of bidding.
“I think we have a fair chance to win, first because we are fairly treated by the Pentagon and second because a large part of our development costs and risk are behind us, as the plane is flying,” he said.
He also emphasized that EADS needs the program to be profitable and would prefer to lose the contract rather than agree to a price that would make it loss-making.

By Aude Lagorce, MarketWatch

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