Is BAE Systems to throw its shipbuilding division overboard?

BAE Systems said all possibilities were being considered for the future of its ship and submarine-building arm, which is under review.

Analysts believe a sale is a serious possibility to help progress the firm's long-sought merger with Boeing.

US giant Boeing recently said it had no interest in BAE's shipbuilding work.

Recent redundancies

"BAE Systems regularly reviews its strategic options in relation to all its businesses, particularly in the context of delivering shareholder value," BAE Systems said in a statement.

Boeing recently said it had been put off merging with BAE partly because of its shipbuilding activities, so a sale could help re-establish those merger talks Analyst Henk Potts The BAE Systems share price

Defence analysts believe there are two main parties interested in taking over BAE System's shipbuilding business - American defence group General Dynamics and UK-based shipbuilder and support services group VT.

Portsmouth-based VT, formerly Vosper Thornycroft, is already involved with BAE in the building of the Type 45 destroyer for the Royal Navy.

In trading on Monday, BAE System's share price had increased by 2% to 219.75 pence.

It recently announced 1760 job losses, 1,000 in its aircraft or air systems division and 760 at its submarine-making facility in Barrow.

The company's naval division is responsibly for £800m of its annual turnover of £12bn, and employs around 5,000 people.

Investor interest

However, in addition to the job losses in Barrow, it has been hit by over-spend problems on an aircraft carrier project for the Ministry of Defence, and is thought to now be operating on a loss.

Henk Potts, of Barclays Stockbrokers, said investors had been stirred by the potential of a tie-up with Boeing.

"Boeing recently said it had been put off merging with BAE partly because of its shipbuilding activities, so a sale could help re-establish those merger talks," he said.