Britain raises pressure over EADS-BAE merger

Mon Oct 8, 2012 4:11pm EDT
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By Sophie Sassard and Emmanuel Jarry

LONDON/PARIS (Reuters) - Britain turned up the volume in a dispute over French state involvement in any tie-up of aerospace groups EADS and BAE Systems on Monday, leaving the European mega-merger on a knife-edge less than 48 hours before a deadline for the deal.

The disagreement over whether Paris can increase its shareholding in future is the latest obstacle to plans to create the world's largest aerospace group, with Berlin's desire for a more favorable deal also a possible hitch ahead.

Resurrecting an idea abandoned by European government leaders in the late 1990s, the new combine would employ 220,000 people and team Airbus airliners with BAE's weapons factories.

To succeed, the deal must balance industrial and security sensitivities in Europe and avoid fuelling concerns over foreign state ownership that could damage BAE's standing in the United States, which is a key priority for Britain.

British Defence Secretary Philip Hammond told Reuters that his opposition to France, which owns 15 percent of EADS, lifting its stake in the merged group beyond a diluted level of 9 percent implied by the proposed deal, was "not a momentary one".

But a French government source insisted Paris must have the option to buy shares in future from French company Lagardere; the firm wants to sell its stake - currently 7.5 percent of EADS - in order to focus on its core media business.

"If France does not even have the possibility to consider buying the stake which Lagardere wants to sell, then for us it is not doable," the French source told Reuters.

Confirming the Anglo-French split had become a key sticking point, after Germany's demands for equal status dominated earlier talks, people familiar with the matter said British and French officials held discussions without the Germans on Monday.   Continued...

Visitors look at an A350 aircraft miniature at the EADS booth during the ILA Berlin Air Show in Selchow near Schoenefeld south of Berlin on September 13, 2012. REUTERS/Tobias Schwarz