German interest in EADS/BAE deal remains unclear

Talks over a planned merger of European aerospace giant EADS and British defence group BAE Systems are progressing but Germany's intentions in the resulting super-firm remains unclear, sources said Tuesday.   The merger of EADS, which controls aircraft maker Airbus, with BAE, Europe's number one defence firm, is "still feasible", an industry source tracking the negotiations told AFP. In Germany, where the government has expressed reservations on the merger, a "majority of people from all parties want it to succeed," he added. German media have been speculating that Berlin planned to take a stake equal to one held by France in the merged company, a move which could have jeopardised tie-up plans. But French newspaper Le Figaro, citing "a good source" Tuesday, said Germany would not seek a stake in the new company. "The German state is not asking for a stake" as part of demands that it has put forward to EADS in merger negotiations, Le Figaro said. EADS would not comment on the report. Another source close to the negotiations told AFP that the idea of the German government investing at the same amount as France "is still on the table". Beyond guarantees on jobs, the industrial sites, research and development, Berlin is rather seeking greater representation in the new firm, such as "for example the number of German administrators", according to someone close to EADS quoted by Le Figaro. Moves by France and Germany to seek a stake in the new firm could torpedo the merger plan, as it is aimed partly as loosening sovereign control in order to facilitate winning defence contracts in the United States. The US is highly sceptical of handing out defence contracts to semi-public foreign companies. Berlin, Paris and London -- which has a "golden share" in BAE Systems -- each have a veto right on the merger negotiations. "The United States, a major BAE Systems client ... would not accept a significant increase of national participation at a Pentagon supplier," the source close to negotiations added. Despite unknowns surrounding to what extent, if any, each nation wants to retain a share of the new firm, sources said negotiations were proceeding well. EADS and British arms manufacturer BAE Systems announced plans on September 12 to create a $45-billion (35-billion-euro) giant to rival Boeing of the United States. The companies have until October 10 to make a formal statement to the authorities to say that the deal is going ahead, being abandoned, or to request a delay. Under the proposal, Germany, France and Britain would each have a so-called golden share with the power to prevent any shareholder from acquiring more than 15 percent of the new entity.