EADS ‘will ditch’ BAE deal over government demands

Aerospace giant is ready to walk away from merger if France and Germany don’t give ground

Aerospace giant EADS is preparing to dump its audacious, £30bn merger with British defence group BAE Systems if European governments fail to lower their demands over the next three days.

Sources close to EADS said the governments, who effectively control the Airbus-maker, need to make “significant progress” in their negotiations to avoid the deal falling apart.

There were reports of a row between Britain and France jeopardising the deal on Friday.

Advisers are understood to have told EADS boss Tom Enders that there is little point extending Wednesday’s Takeover Panel deadline for the companies to come up with agreed terms unless politicians start ceding ground.

Mr Enders is understood to want to avoid upsetting staff any longer than is necessary– the companies have more than 50,000 employees in the UK alone – through the uncertainty surrounding the talks. Even if strides are made, it is unlikely that EADS and BAE can hit the initial deadline and will have to ask the panel for extra time.

The companies broadly agree over the terms of the deal, which would see BAE investors own 40 per cent of the merged entity and EADS shareholders hold the balance.

The Government, which holds a golden share in BAE allowing it to veto a foreign takeover, is persuaded that the deal would save jobs and create a submarines-to-satellites group big enough to take on Boeing. EADS’s rationale for the deal is to rid the group of the state interference which has caused difficulties in expanding into new markets and appointing senior directors.

Rather than directly or indirectly owning shares in EADS, Mr Enders wants France and Germany to follow the UK’s lead in BAE by all three just having golden shares in the merged group.

However, France wants to retain a strong equity stake, Berlin wants parity with Paris, and Britain doesn’t want any one state owning too much of the company.