BAE Systems plc : UPDATE : BAE Systems Gets Boost After Oman Takes Next Step In Typhoon Deal

01/23/2012| 09:24am US/Eastern

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--Oman asks for RFP from BAE Systems

--BAE says detailed talks to include in-supply support, potential for offset

(Adds details, comment)

By Kaveri Niththyananthan

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BAE Systems PLC (BA.LN) shares rose Monday after the government of Oman requested a more detailed proposal from the defense giant for the Eurofighter Typhoon, marking an important step toward sealing a multimillion-dollar deal with the sultanate.

The Omani government issued a "Request For Proposal" to BAE Systems, the prime bidder on behalf of the Eurofighter consortium whose Typhoon jet fighter Oman said it intended to order in 2010.

BAE Systems will now start more detailed talks for the supply and support of the Typhoon fighter aircraft for the Royal Air Force of Oman, which could lead to a final order for 12 Typhoon aircraft, a company spokeswoman said.

At 1240 GMT shares of BAE Systems were up 2.6%, or 8 pence, at 322 pence.

The Eurofighter consortium is made up of BAE Systems, Italy's Finmeccanica SPA (FNC.MI) and European Aeronautic Defence & Space Co. (EAD.FR). Different members of the consortium have taken the lead in bidding for possible contracts with government customers. Prime bidders can expect a larger share of the future benefits of a successful deal than other consortium partners.

"This news underpins the long-standing defence and security relationship between Oman and the United Kingdom and between the armed forces in Oman and BAE Systems, a major supplier of equipment and services to the sultanate," the BAE spokeswoman said.

BAE declined to comment on the potential value of the deal as negotiations will now include likely talks about the level of in-service support and potential investment in the country, known as offset.

Countries in the Persian Gulf are looking to ramp up defence spending as political tension in the region remains high particularly between Iran and the U.S. and its allies.

Eurofighter is also trying to sell the Typhoon to South Korea, Malaysia, Romania, Bulgaria, Croatia, the United Arab Emirates, and Qatar. It is in the final running for an approximate $10-billion Indian air-force deal for 126 fighter jets, competing against France's Dassault Aviation S.A.(AM.FR). India expects to make a decision soon.

The appetite from the Middle East, Asia and Eastern Europe is good news for European and U.S. defense contractors as home governments tighten defense budgets.

But competition is fierce. BAE was the prime bidder for order from Japan but lost out in late December to Lockheed Martin Corp.'s (LMT) F-35 Lightning II Joint Striker Fighter.

-By Kaveri Niththyananthan, Dow Jones Newswires; 4420 7842 9299; kaveri.niththyananthan@dowjones.com (Leila Hatoum in Dubai contributed to this story)

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