Taking a look at yesterday's market capitalization figures for the top US defense contractors plus BAE Systems and EDS shows the logic for them to get together. "BEADS" would, depending on the dilution effects of linking up will put them neck and neck with Lockheed Martin (LMT) and in second place behind Boeing.
Given BAE Systems management are serious enough about EADS to put themselves in play, announcing their intent to the stock markets, one of the cultural reasons behind BAE's move could be that they see it as better to retain autonomy in Europe than risk being the junior partner in a Transatlantic merger scenario.
Amongst US players Northrop Grumman would offer the best option for a merger of near equals and the product mix would be interesting for the combination, though perhaps lower on the value chain than Northrop would like. GD and LMT offer the biggest logic given General Dynamics Land Systems operations versus Lockheed Martin's F-35 Lightning II ("JSF") programs.
The image attached graphs out current market capitalizations offering a ranking of the main players.