BAE/EADS mega merger on brink of collapse

BAE/EADS Mega Merger 'On Brink Of Collapse'


It is reported that a row between the British and French Governments has placed the planned £38bn merger in jeopardy.


4:22pm UK, Friday 05 October 2012

A deal would create a defence/aerospace giant

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Fears are growing that the planned 'mega merger' between BAE Systems and EADS is at risk because of the equity demands of European Governments.

The online edition of Germany's Spiegel magazine, citing Government sources, claimed that the £38bn deal was on the brink of collapse because of a disagreement between the French and British Governments.

It reported that Britain wanted to prevent at all costs any one state owning more than 10% of the merged defence and aerospace company but France was insisting it should hold more than that while obtaining the option to buy even more shares later on.

Germany, France and Britain must agree on their respective holdings in the combined entity if the deal is to go ahead.

BAE declined to comment on the report though EADS denied it was true.

A spokesman said: "We have been informed by the governments about the status of the discussions but in no way have we been told that the deal is off.

"We continue to work towards the October 10 deadline that we have been given by the UK Government," he added.

According to the Financial Times, more than 40 Tory MPs have signed a letter to the Prime Minister demanding "safeguards" over the French and German shareholdings.

The French President's office declined to comment on the reports about the merger collapse.

What a terrible shame if squabbling among European countries demand too much. I can understand BEA Systems wanting

a limit of 10% holding by any one Country otherwise Britain would be swallowed up by the EU. This deal is worth £35 Billion and would put EADS and BAE in a strong worldwide position.

another example on why Britain should get out of the EU.

What a performance!!! Germany, which has no stake in EADS is resisting the deal unless they have more say.!!!!! France is suggesting Germany can buy shares in EADS which would give the Country more say, apparently EADS ( a European venture) needs money.

There is a real risk of the deal falling through , deadline is 10th October.

Invesco, a major shareholder is unhappy about the deal and if BAE has any sense it will opt out NOW. The company has a very good relationship around the World, particularly in the U.S. and can do without all this political interference by Germany.

French BAE-EADS Demands Threaten Deal, U.K. Minister Says


By Kitty Donaldson - Oct 8, 2012 12:01 AM GMT+0100

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Any French government demands to retain more than 10 percent of a combined BAE Systems Plc (BA/) andEuropean Aeronautic, Defence & Space Co. (EAD) risk derailing the merger, U.K. Defense Secretary Philip Hammond said.

Hammond will have what he described as “crucial” three-way talks with his French and German counterparts at a NATO defense ministers’ meeting in Brussels tomorrow, in which he will set out the U.K.’s resistance to any government holding more than 9 percent of the planned company after the merger.





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U.K. Defense Secretary Philip Hammond




Ben Stansall/AFP/Getty Images

U.K. Defense Secretary Philip Hammond said, “If we are going to keep this thing in play we need a clear signal back from the French in particular that they are willing to reduce their shareholding, where they are effectively an investor in the company, not a state party trying to run the company.”

U.K. Defense Secretary Philip Hammond said, “If we are going to keep this thing in play we need a clear signal back from the French in particular that they are willing to reduce their shareholding, where they are effectively an investor in the company, not a state party trying to run the company.” Photographer: Ben Stansall/AFP/Getty Images

“If we are going to keep this thing in play we need a clear signal back from the French in particular that they are willing to reduce their shareholding, where they are effectively an investor in the company, not a state party trying to run the company,” Hammond said in an interview yesterday at theConservative Party’s annual conference in Birmingham, central England. Asked if he is optimistic a deal can be struck between the three governments, he replied: “I didn’t say that.”

With an Oct. 10 deadline to formalize their plan approaching, EADS and BAE have been attempting to dispel government concerns about how a combination of Europe’s largest aerospace company and the biggest defense contractor will affect the states’ role as well as jobs and the centers of command.Germany, which doesn’t have a direct stake in EADS, has been lobbying for more involvement, while French officials have said they want to retain their influence.

“The French and German governments need to get down below 10 percent,” Hammond said.

Lawmakers’ Demands


A group of 45 Conservative lawmakers have written to Prime Minister David Cameron demanding French, Spanish and German government shareholdings in the combined company be removed as a condition for their support for the deal. Concerns raised in the letter include national-security risks, BAE’s U.S. defense contracts and possible “interference” by foreign governments to protect jobs in their own nations over the U.K.

If agreement can be reached on the shareholdings, “there will still be a lot of other things that need to be addressed, but there will be a sense that then the deal is within reach,”Hammond said. He added that if the French agree to a reduction in their stake, he would expect the Germans to go along with that.

“It’s not realistic to expect the French state to get rid of its shareholding entirely but it has got to be reduced to a level that removes effectively a blocking-minority control over the company, so that the company can operate in a normal commercial way,” Hammond said. He said Britain would retain its“golden share” in a merged company, allowing it to veto any transactions that affect national security.

‘Vital Interests’


“The golden share will remain to allow us to protect our vital national-security interests in the defense business,” he said. He added that the U.K. is prepared to veto the merger if it does not get the deal it wants.

“There will have to be some give and take, but we have red lines,” he said. “It’s a question of if we can get a deal that works for Britain then fine, if we can’t then it doesn’t happen. It’s as simple as that.”

Hammond will meet separately with U.S. Defense SecretaryLeon Panetta in Brussels tomorrow. Asked if the U.S. had expressed concerns over the proposed merger, Hammond replied“Not yet, no.” He added that the U.K. is “seeking to establish what the American red lines are.”

The U.K. minister said it’s possible the deal could fail entirely if the U.S. administration decides it does not want to share national-security information with a merged company.

U.S. Requirements


“I think there is that risk, but all the parties to this transaction are well-acquainted with the way the American administration works,” he said. “All parties have taken the view the American government will have some requirements of its own, but it will be possible to accommodate those requirements. They are not going to say no at any price.”

Hammond pledged to protect British defense-industry jobs under any merged company.

“The security around jobs will be delivered by a structure of the company which means it is run commercially, so it’s not subjected to single government pressures to do things which are not commercial,” he said. He said there would also be a set of“specific agreements” that would guarantee “at least for a period of time a certain allocation of jobs in certain places.”

“For us one of the key things is making sure the U.K. retains an appropriate share of the European Airbus work,” he said.

Hammond said he does not expect an agreement before the U.K. Takeover Panel’s Oct. 10 deadline and that the management of BAE and EADS should look for an extension.

“The name of the game for the management teams -- they are not going to get a deal closed by Wednesday -- is to try to get to a point by Wednesday that they can say to themselves we are close enough, and it’s worth seeking an extension and worth carrying this on for another couple of weeks,” he said.

The merger has failed, mostly because of Merkel's insistance that Germany has more say. Most Analysts can't really understand why the talks began in the first place. EADS share price is 26.24 Euro while BAE is 324p, BAE enjoys a good relationship with the U.S. which could be jeopardised if the merger had gone through. There is talk of another bid but I think the shareholders, particularly Invesco with 13% would have something to say.

Apparently BAE is the most vulnerable of the two because the orders from the U.S. are drying up it's troops will be leaving Afghanistan , America is not so heavily involved around the World now, so BAE will feel the effects. Invesco was not impressed that the Board ever thought of a merger with EADS but the German insistence on having more say made the proposition even more unacceptable.