No clear yes or no in Europe’s defense merger plan

PARIS - Agence France-Presse

Visitors look at aircraft models at the EADS booth during an aviation show in Berlin.

European aero groups EADS and BAE Systems have 17 days to reveal if their wedding is on or off, and their efforts to get to the church on time now depend on the German and French governments. But German Chancellor Angela Merkel and French President Francois Hollande did not use a meeting in Germany over the weekend to reach a decision, with an October 10 deadline hanging over them under British market rules.

The proposed tie-up announced by the two groups on September 12 would change the landscape of the global aerospace industry, creating a broadly based competitor to U.S. groups, notably Boeing, with the ability to develop a big presence in the North American market. Though the two parties may request an extension, so far they have ruled this out, saying that they want to complete the negotiations quickly.

The European firms say that EADS, which makes Airbus airliners, and BAE Systems, which has big interests in defense industries, would be worth together about $45 billion (34.6 billion euros). The governments of Germany and France each have a hand in 22.35-percent stakes in the European Aeronautic Defense and Space company.

EADS unites space and defense interests alongside Airbus airliners and has remained an industrial champion to both France and German.

‘Golden share’ in BAE

Until 2006, BAE Systems owned 20 percent of Airbus, which it sold to focus on business in the United States but also after years of unease with the complex system of governance and the intrusion of German-French national factors. The British government has a so-called golden share in BAE Systems which could be used to prevent any foreign interest from holding more than 15 percent of the firm.

Under the tie-up, presented as a merger, shareholders in EADS would in fact be the dominant party with a 60-percent interest. Holders of BAE Systems stock would have an interest of 40 percent. The British side has said explicitly that the prospect of political interference in a new aerospace entity would cause BAE Systems to end the engagement.