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BAE wins massive defence contract
LONDON, England -- BAE Systems, Europe's largest defence company, had been awarded a multi-billion pound UK government contract to build two aircraft carriers. French company Thales, which also bid for the main contract, was given a one-third share of the £2.9 billion ($4.76 billion) contract, Defence Secretary Geoffrey Hoon announced on Thursday. "We envisage that this alliance will be led by BAE Systems as the preferred prime contractor with responsibility for project and shipbuilding management," Hoon said. "Thales UK will assume a major role as the key supplier of the whole ship design," he said. "We anticipate that the engines will be provided by Rolls-Royce." BAE stocks dropped 3.6 percent to 114 pence, while Thales rose 2.3 percent to 26.51 euros after the announcement. Rolls-Royce shares rose 1.3 percent to 96.5 pence. BAE dropped as investors were reluctant for the company to take on more risk. It has previously been unable to deliver contracts on time and could be forced to set aside £800 million to £1 billion for cost overruns on Nimrod surveillance aircraft and Astute hunter-killer nuclear submarines. The contract, expected to create or sustain up to 10,000 UK manufacturing jobs, was among the largest defence contracts expected this year in Europe. The two carriers are scheduled to go into service in 2012 and 2015. At up to 60,000 tonnes, they will be three times the size of the Royal Navy's current Invincible-class carriers and are expected to carry up to 50 aircraft. The contract was seen as a key test of the UK's policy of putting defence procurement tenders out to foreign bidders. Some defence analysts said the outcome looked like a compromise. "It was a political solution," one told Reuters. BAE is the UK's largest defence company and top warship builder, while Thales already supplies defence electronics, including radar and sonar systems, to the Royal Navy. "We will be taking responsibility for the design and integration of the highly complex systems, as well as for the construction and support of a vital British naval system expected to be in service for the next 50 years," Chris Geoghegan, chief operating officer of BAE Systems, told the UK Press Association.
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