Germany, Britain, France to meet on EADS-BAE merger

The proposed merger of EADS with BAE Systems could get a push this week when defence ministers of Germany, Britain and France meet to draw up a common position on the multi-billion-dollar bid.

A woman wears the logo of European aerospace giants EADS on her hat at an airshow near Berlin on September 13. Germany has serious doubts over a proposed merger between EADS and BAE Systems, according to a parliamentary commission report that cites concerns on the future of European sites, German news agency DPA reported.

The proposed merger between the European Aeronautic Defence and Space Company (EADS) and British arms maker BAE Systems has raised major concern in Britain on fears that it would put a strategic company in foreign control, prompting a parliamentary commission to launch a probe on the issue.

It has also sparked worries over Britain's political relationship with the United States, from where BAE derives almost half its business.

And in Berlin, the parliamentary economic affairs commission raised serious doubts over the merger in a report, citing fears over the future of EADS's European sites, among other concerns.

Amid increasing doubts on the merger, an advisor to the French defence ministry told AFP that defence ministers from the three countries would meet this week in Cyprus to discuss the project.

"A first tripartite discussion at the defence minister level will be held in Cyprus on the EADS/BAE file on Wednesday or Thursday," the aide said.

He added that the meeting would take place within the framework of an informal meeting of defence ministers on the eastern Mediterranean island.

The meeting comes as a group of British deputies tasked with scrutinising defence policy announced on Monday a probe into the impact of a tie-up on British defence, "including the protection of sovereign capabilities."

The inquiry carried out by the Defence Committee, made up of lawmakers from across British political parties, is to extend through October and November.

"The (British) Defence Committee is today announcing its inquiry into the possible merger of BAE Systems with EADS," a statement said on Monday.

"The merger of two such large defence contractors would have a significant and strategic impact on their relationships with UK, US and European governments.

"It could also radically alter the defence industrial base in these countries. The inquiry will examine the likely impact of such a merger on UK defence including the protection of sovereign capabilities and the nature of the defence industrial base," the statement added.

The announcement was made as it emerged that British Prime Minister David Cameron had spoken with his counterparts in France and Germany about the tie-up.

Cameron's official spokesman declined to give details of the discussions but said that "given the nature of the companies' activities... we need to ensure that the UK's public interest is properly protected.

"We are working with the companies to ensure that that is the case. We are also talking to people in other countries about this."

In Berlin, the German parliamentary economic affairs commission said in a report that there have been inadequate guarantees on keeping company sites open. EADS has operations in France, Germany and Spain.

It also noted reservations over the fact that EADS, the parent company of Airbus, would hold only 60 percent of the new group under the proposed $45-billion (35-billion-euro) deal, and that veto rights of participating countries would be limited.

EADS chief executive Tom Enders will address the Bundestag's economic affairs committee Wednesday to answer lawmakers' questions on the proposal, said the committee's head, Ernst Hinsken.

The planned merger was a major topic in talks between German Chancellor Angela Merkel and French President Francois Hollande over the weekend.

Merkel told reporters afterwards that "the discussions were good and in a spirit of friendship, but we do not need to discuss the details in public, particularly when it comes to jobs".

Hollande said the two governments would continue to "work closely together" and aimed to meet a deadline of October 10, by which time a formal bid must be made under British takeover laws.

BAE Systems and EADS revealed this month that they were in talks to form a global aerospace and defence leader that would compete more effectively against US rival Boeing.

Crucially, however, the proposed transaction would give BAE 40 percent of the proposed enlarged group and EADS the majority 60-percent stake.

Under the plan being discussed, the newly merged group will issue special golden shares to each of the French, German and British governments, to replace their current ownership structures.

Britain has a special share in BAE but does not get involved in the day-to-day running of the business.

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