BERLIN/PARIS: Airbus parent EADS and arms group BAE Systems must restructure a $45bn merger, a top shareholder said, as a government source threatened that Britain would block talks to create the world’s biggest defence company unless its demands were met.
Faced with a steep drop in global defence spending, EADS and BAE are re-examining a tie-up to create a European giant to compete with American heavyweights such as Boeing which almost came about in the late 1990s.
But state stakeholdings in EADS and BAE’s sensitive defence contracts in Saudi Arabia and the United States mean success will hinge on winning over governments to back the idea with talks intensifying in European capitals.
French conglomerate Lagardere yesterday called terms of the deal “unsatisfactory” and demanded a review, adding to pressure from French and German governments with talks moving closer to an October 10 deadline to decide whether to proceed. “Despite the industrial and strategic potential attributed to it, this plan has not yet demonstrated that it was creating value for EADS,” Lagardere said in a statement.
EADS shares have shed more than ¤4bn ($5.2bn) in value since news of the talks broke last month due to investors’ misgivings. That means Lagardere’s 7.5 percent stake has lost more than ¤300bn in value. “Lagardere invites the executive management of EADS to proceed immediately with an indispensable review of the tie-up plan of EADS and BAE,” it said.
Lagardere, the French government and German automaker Daimler are part of a core shareholder pact which underpins EADS, which was formed in 2000 from major aerospace companies in Germany, France and Spain.
CEO Tom Enders, who with BAE counterpart Ian King wrote an article published on Monday in three European papers defending the deal, met Lagardere’s CEO Arnaud Lagardere yesterday.
A spokesman for the French media group declined to comment on the content of the talks.
In the company’s statement earlier, Lagardere’s concerns focused on conditions of the merger, which call for a 60-40 percent split between EADS and BAE in the combined company.
Reuters
