October 01, 2012
Credit: Credit: Eurofighter
FRANKFURT — French President Francois Hollande has approached Germany with the idea of creating a joint blocking minority stake in the new company that would be created as a result of the proposed merger of BAE Systems and EADS, according to industry sources.
That status could be achieved as a result of various complex transactions and would ensure more government influence beyond the golden share proposal brought forward by EADS CEO Tom Enders.
It also would likely be a deal breaker, because the U.K. government is understood to consider such a strong government position in the new entity to be unacceptable. It currently owns a golden share in BAE Systems to protect the company from a hostile takeover, but BAE is otherwise privately owned. The U.K. also would be the only one of the four represented governments, which also includes Spain, without a stake in the aerospace group.
To reach a blocking minority, the combined Franco-German stake would have to exceed 25%. France currently owns 15% and could buy another 7.5% now held by the Lagardere Group. Germany would have to buy 15% held by Daimler and 7.5% kept by a consortium of banks. That combined 45% stake would be diluted to 27% following the merger.
That France will not sell its EADS stake has become increasingly obvious since the transaction plans became public two weeks ago. However, not only does France not want to sell, the proposed golden share, it also appears to be not nearly the kind of protection and mechanism for influence the government wants to keep. Because the combined French stake would be diluted from its current 22.5%, France needs German support to remain in control.
Germany has serious reservations about the deal, too, that—combined with the U.K.’s likely objection to France’s scheme—seem to make the transaction increasingly unlikely.
Enders not only wants to create the world’s largest aerospace company, far exceeding Boeing by revenues, but also wants to establish a company mostly free of government influence.
Meanwhile, former German Defense Minister Peter Struck has spoken up in favor of the proposed merger. “From my experience as defense minister, I can only welcome the planned cooperation,” Struck tells Aviation Week. Struck, a member of opposition Social Democrats party, was defense minister from 2002 to 2005 and was parliamentary leader of his party before resigning to head the party’s think tank, Friedrich-Ebert-Stiftung. He argues that to effectively compete with Boeing, EADS needs to strengthen its defense business.