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UPDATE 2-BAE makes progress on Saudi deal, courts other buyers for Eurofighter

Brenda Goh
Wednesday, 22 Jan 2014 | 10:49 AM ET

Eurofighter@

LONDON/DAVOS, Jan 22 (Reuters) - Defence company BAE Systems said it was making progress on a deal with Saudi Arabia over the pricing for Eurofighter jets and was seeking other buyers for the aircraft after the collapse of a potential sale to the United Arab Emirates.

BAE's Chief Executive Ian King said a series of other bids with other air forces had been put in. Current orders, including a deal with Oman for 12 aircraft, would guarantee that the manufacturing line will stay busy till 2018, King, speaking to reporters in London on Wednesday, said.

BAE shares lost about 5 percent on Dec. 20, the day after it announced the end of talks with the UAE over a potential $9.8 billion Eurofighter deal and said that Saudi talks had still not been resolved. The shares have since recovered that value.

"Watch this space," BAE's chairman Richard Olver said in an interview with Reuters Insider in Davos when asked when investors should expect a resolution to the long-running price negotiations with the Saudis.

"We're always talking to our most important customers and Saudi is a very important customer," he said, when asked if discussions were taking place this week.

The continued delay of the so-called Salaam deal for Eurofighter jets has pushed BAE to repeatedly trim its full-year earnings forecasts. JP Morgan Cazenove analysts said last month that the failure to reach agreement was perplexing.

King attributed the UAE's withdrawal to the country's conclusion that the deal could not be made within its budget and the required time scale, but said despite this the relationship between the UAE, Britain and the company remained very good.

"This does not impact our ability to sell to other nations, and in fact you could say that it's actually raised that because everyone knows that the UAE air force had a very top end, exacting set of requirements," he said.

"So there's no other nation or no other air force that's going to require capability which is beyond what we can offer to the UAE," he said, adding that it was unlikely that the negotiations would restart, calling the talks "done".

The Eurofighter is backed by BAE along with European aerospace group Airbus and Italy's Finmeccanica .

GREATER CLARITY

On the United States, where BAE recently appointed a new chief executive, King said that the U.S. government's budget agreement for the next two years gave the company much needed-clarity on what military programmes might be affected, and allowed them to plan accordingly.

He also said that the company's strategy for 2014 was unchanged from that of last year, with its main goals including growing its cyber business and electronic systems arms and increasing its international footprint.

Like other defence contractors such as Lockheed Martin and Finmeccanica, BAE has been grappling with falling military spending from its biggest U.S. and European customers, forcing it to look for growth in new regions such as the Middle East as well as capabilities such as cyber security.

As part of that strategy the company is rebranding its cyber security unit, whose name it is changing from Detica and BAE Systems Applied Intelligence, to court more commercial clients such as financial services firms and insurers.

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