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Spotlight On Germany As EADS, BAE Inch Towards Deal

By Reuters
October 05, 2012
Credit: Credit: BAE Systems

EADS and BAE Systems have edged closer towards winning political backing for a $45 billion merger to create the world’s biggest arms group amid positive signals from Britain and France, but German misgivings over control is a big obstacle, sources close to the talks said.

A number of potential stumbling blocks have emerged since the proposed tie-up between the Airbus manufacturer and the British defence group was announced last month. These include conflicting political interests in Britain, France and Germany, as well as some shareholders’ dissatisfaction with the terms.

Negotiators are sticking to a British regulatory deadline of Oct. 10 to keep up pressure for a face-saving deal squaring German demands for equal treatment to France, which would have a government stake, with company opposition to outside influence.

But the door has been left open to a 1-2 week delay if the talks show enough progress, according to dates circulated for possible internal union briefings on the deal. “We are working towards Oct. 10,” a person familiar with the EADS position said.

Two sources familiar with the talks said next Wednesday’s deadline, imposed by UK regulators, was optimistic but that the companies would not release pressure for a deal by asking for an extension without a decisive step forward in the talks.

The wait means another frustrating weekend for minority investors who have demanded details of the proposal to create an aerospace and arms company to rival the U.S. giants.

“As far as we are concerned, there’s been no attempt to explain the rationale for the deal to investors,” said Barry Norris of Argonaut Capital Partners, an EADS investor. “This is one of the worst ever proposed mergers I have ever seen.”

Shares in both companies edged 1 percent higher. EADS is 12 percent below its level before talks became public last month.

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