Dawn Lim | Nextgov | September 14, 2012 | 0 Comments

EADS, BAE deal could roil U.S. defense industry

The European Aeronautic Defense and Space Co. is the parent company of Airbus. Oliver Fantitsch/AP file photo

The European Aeronautic Defense and Space Co. and BAE Systems of Britain are in merger talks to create the world's largest aerospace and defense company, the Wall Street Journal reports.

EADS, the parent of aircraft maker Airbus, has struggled to expand in the crowded U.S. market. A deal with BAE, which has a larger American presence, could provide deeper pockets and give Airbus a lift in its rivalry with Boeing. BAE and EADS posted combined revenue of roughly $90 billion last year. Their combined market value is $49 billion.

A merger could trigger new alliances among U.S. defense contractors seeking to gain an edge against a mega rival. Another factor fueling rumors of future mergers and acquisitions: possible sequestration cuts, due to kick in on Jan. 2, 2013, are prompting the Pentagon to rethink its wariness about consolidation among top companies in the weapons industry.