BAE Systems – Typhoon deal shot down, and credit extended

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There was bad news from BAE Systems yesterday – issued after close of trading which is always a negative sign.

Firstly the prospective deal to sell Typhoons to the United Arab Emirates (UAE) is apparently a dead duck. That’s perhaps not altogether surprising. But the worse news was that the pricing of a sale of the same planes to Saudi Arabia under the Salam contract has still not yet been agreed. The announcement says the parties are “actively engaged” but a “definitive agreement has yet to be reached”.

To put it bluntly, after three years of negotiation and having built and delivered the products, there is still no deal and no obvious timescale for its conclusion.

As I said back in August this year, surely delivering anything before you have agreed a price is a basic business error. The other party has no need to agree anything other than a deal very favourable to them if you let them use the product without paying in full.

This no doubt is a legacy of the Chairmanship of Dick Olver, who when I spoke to him at the time of the BAE/EADS merger debacle suggested that there were few other people who could negotiate with heads of state on major deals such as this contract. Perhaps someone with more common sense might have done better!

Roger Lawson

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