Shareholders' merger doubts pile pressure on BAE

BAE Systems' £30bn merger with European aerospace giant EADS came under further pressure yesterday as, with governments poring over the politically-sensitive details, shareholders expressed doubts regarding the proposed deal.

David Cumming, head of equities at Standard Life Investments — which owns 0.84 per cent of BAE — warned over the political hurdles to the tie-up and criticised the company's lack of communication with major shareholders to explain the attempt to create the world's largest arms company. "We're in the sceptical camp at the moment," he said.

Meanwhile, another top shareholder – who declined to be identified – said that it was "going to be tricky getting it through the various stakeholders."

Saying that getting the merger approved by shareholders would be "the easiest part of it", he added: "There are a lot of interested parties, so it's not going to be trivial at all."

The planned merger — news of which was rushed out last week after a leak — would see EADS holding 60 per cent and BAE 40 per cent of the new company.

However it needs approval from a number of governments, including France's and Germany's, who each own 22.5 per cent stake in EADS, while Spain holds 5.5 per cent.

Meanwhile, the US government, a major customer of BAE, has national security concerns, while Britain — which could block the deal with its "golden share" — also has worries over the security of its Trident nuclear submarine programme.

It is understood that BAE would be prepared to make ring-fencing Trident a priority if the merger happens.

Mr Cumming told Radio 4's Today programme: "I think it is a difficult deal as you've got US concerns over defence technology leakage and you've got political issues — not just Germany and France but also the UK.

"There's golden shares all over the place, so we're relatively sceptical. Also, BAE have been shy in communicating the rationale for the deal to shareholders — it's all very quiet out there."

France's Finance Minister, Pierre Moscovici - who was in London for a meeting with George Osborne - said the French government was asking "lots of questions" over the merger.