Germany to make proposals to France on EADS-BAE merger

Fri Sep 28, 2012 9:03am EDT
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By Gernot Heller

BERLIN (Reuters) - Germany is set to present France with proposals concerning the planned merger of Airbus parent EADS EAD.PA and British defense contractor BAE Systems (BAES.L: Quote), a German government source said on Friday.

Agreed by Chancellor Angela Merkel's office and the economy ministry, the proposals are aimed at preserving a balance of power between the two countries in the merged company, the source said.

France directly owns 15 percent of EADS and wants to retain its right to influence group strategy, currently conducted in EADS through a complex pact that includes a 7.5-percent stake held by French conglomerate Lagardere (LAGA.PA: Quote).

Germany is not a direct shareholder but sees the transaction as a chance to tighten its grip on a balancing stake currently held by Daimler AG (DAIGn.DE: Quote) and a group of banks.

The German source gave no further details but his comments confirmed a report in Die Welt on Friday which said Germany was ready to buy up the shares of from Daimler and banks via state development bank KfW if France kept its own stake intact.

The merger to create the world's largest defense and aerospace company would dilute the influence of the French, German and Spanish governments in the company, prompting negotiations over their future roles.

The Financial Times Deutschland (FTD) said on Friday that Germany and France may try to secure a 27 percent combined shareholding in the new company, but said Britain was opposed.

The stake would create a shareholder counterweight with the power to block decisions by management of the new company, the newspaper said, citing sources familiar with the matter.   Continued...