Political demands could "make or break" BAE-EADS merger

Mon Sep 17, 2012 8:00am EDT
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By Tim Hepher

PARIS (Reuters) - Talks to create a new European defense giant enter a perilous political phase this week, with national concerns growing over security and jobs while BAE Systems and EADS look ready to scrap their $45 billion merger if governments make too many demands.

After the companies laid out basic proposals to create the world's biggest arms company twinned with jetmaker Airbus, it is the turn of British, French, German and Spanish governments to put forward demands in exchange for giving their backing.

Each is likely to have a shopping list of concerns ranging from German fears over jobs to French soul-searching over the loss of state influence or Britain's need to ensure the creation of a European supergroup does not dent BAE's strong U.S. sales.

While careful to avoid putting public pressure on nations that own the keys to any deal -- and that will also be its major customers -- defense industry sources have ruled out opening the door to protracted negotiations or a cascade of concessions.

A source familiar with the talks said the companies were ready to listen to European governments, but stressed that their responses could "make or break" the deal.

EADS and BAE declined to comment on the political factors involved in completing the merger.

However, EADS said the companies would reserve the last word on the deal for themselves after hearing governments' views.

"We are in good, advanced discussions with the governments concerned," a senior spokesman said.   Continued...

A member of staff works in the cockpit of an aircraft on the Eurofighter Typhoon production line at BAE systems Warton plant near Preston, northern England September 7, 2012. REUTERS/Phil Noble