BAE Systems, a British society in the defense sector, is planning to abandon the merger agreement with European aviation group EADS if it will affect the special relationship it has with the Pentagon, according to Financial Times.
“BAE will not sign the agreement if the so-called Special Security Agreement (SSA) will have to be modified to please EADS,” a source close to the BAE Systems told the U.S. newspaper. The agreement with the Pentagon allows the British company to engage in various projects with the U.S. Army, therefore becoming a major supplier of military equipment to the U.S. The company has in the U.S. 40,000 employees and several production capabilities. EADS has a similar agreement with the Pentagon, but more limited.
“American military would prefer a relationship with BAE as opposed to deal with a joint BAE – EADS company. Unlike EADS, BAE has been successful in its ties with the U.S., and an EADS – BAE joint venture will be perceived as dominated by EADS rather than BAE,” said for the FT a lawyer specializing in such transactions. He believes that the agreement could be completed only if BAE will have a significant control in the new entity that will result from the merger of the two companies.
Negotiations continue
European group EADS, owner of Airbus, said however that merger talks with British company BAE Systems are productive and are on schedule to meet the deadline set for October 10 to provide further details of plans which would create the largest European aerospace and defense company, writes Reuters.
“Discussions on our possible collaboration continue and our intention is to provide new information before October 10,” said a spokesman for EADS.
In recent days there was increased speculation that the two companies will seek an extension of the deadline set by the British authorities because of political disagreements on the transaction. The two companies seek to influence governments to allow this merger.
Financial Times Deutschland newspaper said last week, citing unnamed sources, that EADS is ready to guarantee a job preservation to Germany in order to get the approval from for the merger with the British company.
BAE shareholders would hold 40% of the new company and shareholders of EADS will get the remaining 60%. The two companies will continue to be listed separately in Paris and London, but the boards and management teams will be consolidated into a single structure. In addition, French, German and British governments would have each a preferred “golden share” in the new group.
Angela Merkel said during her meeting with French President Francois Hollande on Saturday, that no decision was made on the merger of EADS and BAE Systems. “I did not make any decision… but Germany and France will maintain close contact on this issue,” said the German Chancellor.
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