Shares in BAE Systems rose yesterday as analysts welcomed reports that UK regulators had offered the firm the chance to settle a bribery probe more cheaply than the market had feared.
Weekend newspaper reports said Britain’s Serious Fraud Office had offered a settlement figure of £300 million (R3564 million). BAE would not comment.
“The surprise element is that the 300 million pounds figure, which has been talked about, is quite a small amount compared to the £1 billion (R11 billion) fine that had previously been mentioned in press reports,” said Evolution defense analyst Nick Cunningham.
“The £1 billion figure spooked the market but £300 million equates to about 8.6 pence a share, which isn’t much from a share price of around £3.50.”
The SFO said last week said it was prepared to prosecute Europe’s biggest defense contractor over allegations the firm used bribery and corruption in arms deals in South Africa, Tanzania, Romania and the Czech Republic dating back to the 1990s.
Britain’s Sunday Times newspaper reported BAE had turned down settlement offered by the SFO after receiving advice the sum was too great for the evidence uncovered and the company could leave itself open to civil lawsuits from shareholders.
The Sunday Telegraph newspaper, which also cited the £300 million figure, said BAE wanted to restart talks with the SFO to get a clearer understanding of evidence against it.
Legal experts estimated last week BAE could face penalties of hundreds of millions of pounds if found guilty but securing a conviction would be very difficult, and both sides would probably seek to settle out of court.
“The figure talked about has probably reassured investors but there is probably some sort of drag on BAE’s price at the moment because the shares are trading at a discount in my opinion,” said Bryan, Garnier & Co analyst Christophe Menard.