US hints at more ties with European arms companies

THE US is open to the possibility of European companies taking over large US defence concerns, the Pentagon said. The change of heart is good news for British Aerospace, believed to be looking at corporate opportunities in the US.

In shift that showed a strikingly more open attitude, an official of the Defense Department said there would be a round of defence merger and acquisition in coming months, and Washington had begun co-ordinating its policy with European governments.

"My personal guess would be that you would start to see a significant number of these (mergers) within months rather than within years," said Under-Secretary of Defense Jacques Gansler. The US has revealed some significant concerns about the takeover of GEC Marconi's defence interests by British Aerospace. Even though both are British companies, both have widespread US interests, and America is concerned its contractors will be locked out of European markets. But now it says it is ready to see even large companies like Northrop Grumman, manufacturer of the B2 bomber - which has been rumoured to be a takeover target - go out of US ownership. "The answer is we're willing to consider it if the company and the country are dependable allies that are going to treat the security appropriately and have the right controls placed over it," said Mr Gansler. Whereas the US had been preparing a set of policy guidelines on mergers and acquisitions, it was now more likely to look at things on a case-by-case basis.

The US has already begun negotiating a pact for handling classified defence information with Britain in preparation for the intensification of defence industrial links. Partnerships with British companies would be relatively easy because of the long-standing defence ties between the two countries, Pentagon officials say.