France, Germany to seek common position on EADS-BAE

BERLIN/FRANKFURT (Reuters) - The leaders of France and Germany will seek a common position at a series of meetings this week on a $45 billion defense merger that could involve them having to giving up strategic influence in aerospace group EADS .

After talks on a tie-up between EADS and Britain's BAE Systems were leaked last week, government officials from across Europe have this week been setting out their views on the deal.

While no government has spoken out directly against the merger, and officials seem to see benefits in creating a company that would have far more weight on the world stage, there are concerns that too many demands from politicians could result in the deal being scrapped.

Angela Merkel said on Wednesday she planned to discuss the matter with French President Francois Hollande at a meeting on Saturday.

Sources had said there would already be preparatory high-level talks on Thursday and Friday. A "pre-decision" for a common position with France could be taken at these preparatory talks, one source said.

A combination of BAE and Airbus owner EADS would overtake U.S. rival Boeing as the world's biggest aerospace and defense company in terms of sales.

GERMAN JOBS

Chancellor Angela Merkel's coalition government has not yet come up with a unified position on the talks, though some German politicians want guarantees for German jobs and to see some activities being headquartered in Germany.

"It cannot be that a Franco-British company is created out of a Franco-German company," Joachim Pfeiffer, a spokesman for Merkel's CDU party told Reuters on Wednesday, saying that he would not accept it if the merged company based its commercial activities in Toulouse and its defense operations in London.

EADS employs almost 50,000 people in Germany at 29 different sites. German media reports this week that EADS boss Tom Enders offered job guarantees to the group's 20,000 defense workers have been dismissed as "nonsense" by officials and by EADS.

In the state of Bavaria, where EADS employs 15,000 people, the regional economy minister said a merger might improve the firms' competitive position but his focus was on securing jobs.

Keeping jobs and technology expertise within Europe's largest economy should be a key factor for the government in deciding whether to approve the deal, a politician from the German opposition Social Democrats said on Wednesday.

"There seems to be some advantages," Hubertus Heil told a German radio station, adding that the government should make an unbiased review of the economic benefits.

NEW PROSPECTS

One of the benefits for EADS in joining with BAE is that it would dissolve a cumbersome shareholder pact dictating that the percentage of shares held by German and French investors must be equal.

For France though, a combination of EADS with Britain's BAE could result in it having to give up influence in a company it has controlled since it was set up, as it would see its stake in the combined group shrink to 9 percent from 15 percent currently.

For Britain, the key is to ensure that the creation of a European group would not affect BAE's strong sales in the United States, which have benefited from the "special relationship" between the two countries.

"If the deal goes ahead it would open up new prospects for Europe in the defense market," Elisabeth Guigou, head of the French parliament's foreign affairs committee, told Reuters. She added though that completing such huge merger deals was "not easy" and that negotiations would likely take a long time.

EADS and BAE have said they will offer the governments of France, Germany and Britain a "golden share" in the new company, which sources say is aimed at preventing a hostile takeover.

Currently, Berlin does not hold a direct stake in EADS, but is in talks to acquire a 7.5 percent holding from carmaker Daimler through state development bank KfW.

These talks have now stalled, a German government source told Reuters. However, if France holds on to its stake in a merged group, then Germany would likely strive for the same.

(Reporting by Gernot Heller; additional reporting by Emmanuelle Jarry and Julien Ponthus; Writing by Victoria Bryan; Editing by Mike Nesbit)

Source: http://news.yahoo.com/france-germany-seek-common-position-eads-bae-125648476--finance.html

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