BAE Systems plc is a British multinational aerospace, arms and information security company, based in London. It is the largest manufacturer in Britain as of 2017. It is the largest defence contractor in Europe and the sixth largest in the world based on applicable 2024 revenues. Its largest operations are in the United Kingdom and in the United States. Its next biggest markets are Saudi Arabia, then Australia; other major markets include Canada, Japan, India, Turkey, Qatar, Oman and Sweden. The company was formed on 30 November 1999 by the £7.7billion purchase of and merger of Marconi Electronic Systems (MES), the defence electronics and naval shipbuilding subsidiary of the General Electric Company plc (GEC), with British Aerospace, an aircraft, munitions and naval systems manufacturer.
BAE Systems is the successor to various aircraft, shipbuilding, armoured vehicle, armaments and defence electronics companies, including the Marconi Company, the first commercial company devoted to the development and use of radio; A.V. Roe and Company, one of the world's first aircraft companies; de Havilland, manufacturer of the Comet, the world's first commercial jet airliner; Hawker Siddeley, manufacturer of the Harrier, the world's first VTOL attack aircraft; British Aircraft Corporation, co-manufacturer of the Concorde supersonic transport; Supermarine, manufacturer of the Spitfire; Yarrow Shipbuilders, builder of the Royal Navy's first destroyers; Fairfield Shipbuilding and Engineering Company, builder of the world's first battlecruiser; and Vickers Shipbuilding and Engineering, builder of the Royal Navy's first submarines.
Since its 1999 formation, BAE Systems has made a number of acquisitions, most notably of Ball Aerospace, United Defense and Armor Holdings of the United States, and has sold its shares in Airbus, Astrium, AMS and Atlas Elektronik. It is involved in several major defence projects, including the Lockheed Martin F-35 Lightning II, the Eurofighter Typhoon, and the Astute, Dreadnought and SSN-AUKUS submarines. BAE is listed on the London Stock Exchange's FTSE 100 Index.
History Predecessors
British Aerospace bought Marconi Electronic Systems for £7.7billion on 30 November 1999 and merged with it to form BAE Systems. The company is the successor to many of the most famous British aircraft, defence electronics and warship manufacturers. Predecessor companies built the Comet, the world's first commercial jet airliner; the Harrier "jump jet", the world's first operational vertical/short take-off and landing (VTOL) aircraft; the "groundbreaking" Blue Vixen radar carried by Sea Harrier FA2s and which formed the basis of the Eurofighter's CAPTOR radar; and co-produced the Concorde supersonic airliner with Aérospatiale.
British Aerospace was a civil and military aircraft manufacturer, as well as a provider of military land systems. The company had emerged from the massive consolidation of UK aircraft manufacturers since World War II. British Aerospace was formed on 29 April 1977, by the nationalisation and merger of the British Aircraft Corporation (BAC), the Hawker Siddeley Group and Scottish Aviation. Both BAC and Hawker Siddeley were themselves the result of various mergers and acquisitions. (Click on Air tab.)
Marconi Electronic Systems was the defence subsidiary of British engineering firm the General Electric Company (GEC), dealing largely in military systems integration, as well as naval and land systems. Marconi's heritage dates back to Guglielmo Marconi's Wireless Telegraph & Signal Company, founded in 1897. GEC purchased English Electric (which included Marconi) in 1968 and thereafter used the Marconi brand for its defence businesses (as GEC-Marconi and later Marconi Electronic Systems). GEC's own defence heritage dates back to World War I, when its contribution to the war effort included radios and bulbs. World War II consolidated this position, as the company was involved in important technological advances, notably the cavity magnetron for radar. Between 1945 and 1999, GEC-Marconi/Marconi Electronic Systems became one of the world's most important defence contractors. GEC's major defence related acquisitions included Associated Electrical Industries in 1967, Yarrow Shipbuilders in 1985, Plessey companies in 1989, parts of Ferranti's defence business in 1990, the rump of Ferranti when it went into receivership in 1993/1994, Vickers Shipbuilding and Engineering in 1995 and Kværner Govan in 1999. In June 1998, MES acquired Tracor, a major American defence contractor, for £830million (about US$1.4billion).
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 commented "Europe... is supporting three times the number of contractors on less than half the budget of the US." European governments wished to see the merger of their defence manufacturers into a single entity, a "European Aerospace and Defence Company".
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. The two companies envisaged including Aérospatiale, the other major European aerospace company, but only after its privatisation. The first stage of this integration was seen as the transformation of Airbus from a consortium of British Aerospace, DASA, Aérospatiale and Construcciones Aeronáuticas SA into an integrated company; with this aim British Aerospace and DASA were united against the various objections of Aérospatiale. 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. A merger was agreed between British Aerospace chairman Richard Evans and DASA CEO Jürgen Schrempp.
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." 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.BAE Systems Annual Report 1999 22. BAE Systems plc (2000). Evans stated in 2004 that his fear was that an American defence contractor would acquire MES and challenge both British Aerospace and DASA. 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", 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. 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.
Seventeen undertakings were given by BAE Systems to the 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 "firewalling" of former British Aerospace and MES teams on defence projects such as the 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".
BAE Systems inherited the UK government-owned "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 without the permission of the Secretary of State. These Articles require that no foreign person or persons acting together may hold more than 15% of the company's shares.
2000s BAE Systems' first annual report identified Airbus, support services to militaries and integrated systems for air, land and naval applications as key areas of growth. It also stated the company's desire to both expand in the US and participate in further consolidation in Europe. BAE Systems described 2001 as an "important year" for its European joint ventures, which were reorganised considerably. The company has described the rationale for expansion in the US; "[it] is by far the largest defence market with spend running close to twice that of the Western European nations combined. Importantly, US investment in research and development is significantly higher than in Western Europe." When Dick Olver was appointed chairman in July 2004, he ordered a review of the company's businesses which ruled out further European acquisitions or joint ventures and confirmed a "strategic bias" for expansion and investment in the US. The review also confirmed the attractiveness of the land systems sector and, with two acquisitions in 2004 and 2005, BAE moved from a limited land systems supplier to the second largest such company in the world. This shift in strategy was described as "remarkable" by the Financial Times. Between 2008 and early 2011, BAE acquired five cybersecurity companies in a shift in strategy to take account of reduced spending by governments on "traditional defence items such as warships and tanks". By 1 February 2011, the company had more than 6,500 cyber jobs across 10 countries.
In 2000, Matra Marconi Space, a joint BAE Systems/Matra company, was merged with the space division of DASA to form Astrium. On 16 June 2003, BAE sold its 25% share of Astrium for £84million; however, due to the lossmaking status of the company, BAE Systems invested an equal amount for "restructuring". BAE Systems sold its 54% majority share of BAE Systems Canada, an electronics company, in April for CA$310 (approximately £197million as of December 2010). In November 2001, the company announced the closure of the Avro Regional Jet (Avro RJ) production line at Woodford and the cancellation of the Avro RJX, an advanced series of the aircraft family, as the business was "no longer viable". The final Avro RJ to be completed became the last British civil airliner. In November 2001, BAE sold its 49.9% share of Thomson Marconi Sonar to Thales for £85million. A further step of European defence consolidation was the merger of BAE's share of Matra BAe Dynamics and the missile division of Alenia Marconi Systems (AMS) into MBDA in December. MBDA thus became the world's second largest missile manufacturer. Although EADS (now Airbus) was later reported to be interested in acquiring full control of MBDA, BAE said that, unlike Airbus, MBDA is a "core business".