UPDATE 2-UK halts 6 bln stg helicopter deal after bid issue

* Preferred bidder finds “possible issue” with its bid

* UK says not appropriate to proceed until issue resolved

* Preferred bidding consortium includes Thales, Sikorsky

* Thales shares down 3.5 percent

(Adds Thales shares, analyst comment, detail)

By Rhys Jones and Tim Hepher

LONDON/PARIS, Dec 16 (BestGrowthStock) – Britain halted negotiations
on a contract for helicopter search and rescue services after
the preferred bidder become aware of an unspecified “possible
issue” with its bid, a minister said on Thursday.

Earlier this year, Britain chose the Soteria consortium,
which includes French defence company Thales (TCFP.PA: ), as
preferred bidder for the contract worth 6 billion pounds ($9.4
billion). [ID:nLDE6182GW]

“The preferred bidder has informed the Ministry of Defence
within the last 48 hours that it has become aware of a possible
issue in connection with its bid to provide the UK search and
rescue capability, which was the basis of its selection as the
preferred bidder as announced in February 2010,” Transport
Secretary Philip Hammond said.

The MoD said it could not give any further detail, saying
the matter was commercially sensitive.

Hammond and Defence Secretary Liam Fox had been expected to
announce on Thursday they intended to go ahead with negotiations
with the preferred bidder. An MoD spokeswoman said there was now
no immediate date when further details would be given.

The Soteria consortium also includes CHC, a Canadian
helicopter services company, Sikorsky — part of United
Technologies Corp (UTX.N: ) — and Royal Bank of Scotland (RBS.L: ).
It would use the Sikorsky S92A helicopter.

Thales shares were down 3.5 percent at 26.87 euros by 1125
GMT.

DOMESTIC CONCERNS

Execution Noble analyst Edward Stacey said uncertainty about
the deal and comment by Thales Chief Executive Luc Vigneron on
its slow margin progress were both hurting the stock.

“There are two headlines … one, Vigneron was quoted (in
Les Echos) as saying margin progress would be slow … second,
the UK search and rescue that was supposed to be decided this
week … it is really both,” said Stacey.

A spokesman for Soteria was not available for comment.

The reasons for the suspension were not clear but it follows
growing domestic concern over the costs of the proposal to
demilitarise Britain’s search and rescue fleet.

UK government and aerospace industry officials, who are
upset about proposals to replace Westland Sea Kings with the
U.S.-made S-92s, have called for a pause or rethink of plans.

Soteria won the contract after competing with a consortium
known as Airknight led by EADS (EAD.PA: ) and Lockheed Martin
(LMT.N: ), based on EADS unit Eurocopter’s ERC-225 helicopter.

Anglo-Italian helicopter company AgustaWestland, owned by
Finmeccanica (SIFI.MI: ), pulled out of the original contest.

Neither group commented but both are seen likely to call for
a rematch with a new bidding contest if the terms of the
outsourcing arrangements are changed radically.

AgustaWestland would also benefit from any move to maintain
and upgrade the current fleet of Westland Sea Kings, the
reliable but ageing helicopter which first flew 50 years ago and
which covers Britain’s 11,000-mile (17,600 km) coastline.

British 24-hour search and rescue operations are carried out
from 12 bases, of which eight are operated by the military,
including RAF Valley in north Wales where Prince William, second
in line to the British throne, qualified as a rescue pilot.

This will be replaced by a contract that will see some
military personnel working with civilian aircrew.

The consortium was due to take over search and rescue
services in Britain from 2012, for 25 years.
(Additional reporting by Lionel Laurent in Paris and Michael
Holden in London; Editing by Rosalba O’Brien and David Holmes)
($1 = 0.6384 pound)

UPDATE 2-UK halts 6 bln stg helicopter deal after bid issue