UK says prepared to veto EADS-BAE merger

Sun Oct 7, 2012 11:21am EDT
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BIRMINGHAM, England (Reuters) - Britain will block the proposed $45 billion merger between EADS EAD.PA and BAE Systems (BAES.L: Quote) if key "red line" priorities are not met, defense minister Philip Hammond said on Sunday, just three days before a deadline for detailing the deal.

Tensions over the supermerger have spilled into the open in recent days as France, Britain and Germany jockey over the role of the state in what would be the world's largest aerospace and arms group.

"We want to see this company ... prospering as a commercial business, focused on doing things that are right for the business, not beholden to or controlled by any one government," Hammond told BBC radio.

"It is not necessary to have no French or German government interest in the company. It is necessary to reduce that stake below the level at which it can control or direct the way the company acts," he said.

EADS and BAE announced plans for a merger last month, but their efforts have become snagged on differences over control between France and Germany, while there are also political concerns about jobs.

"We have made very clear that we do have red lines around the BAE-EADS merger and that if they can't be satisfied then we will use our special share to veto the deal," Hammond said, referring to Britain's so-called "golden share" in BAE that gives it the power to block a transaction involving the company.

Britain would judge the deal against how it protected the country's security and jobs, added finance minister George Osborne.

"Our priorities are of course the national security of the United Kingdom, second: jobs and investment in the UK," Osborne told Sky television.

EADS is controlled by a pact between the French state and two core industrial shareholders, France's Lagardere and German carmaker Daimler. The trio collectively owns 45 percent.   Continued...

A BAE Systems sign is seen outside the company's Warton site near Preston, northern England, in this file picture taken October 1, 2009. REUTERS/Phil Noble/Files