U.S. KEEPS CLOSE TABS ON FOREIGN STAKES
The U.S. government addresses foreign ownership or control of U.S. companies through a review by the Committee on Foreign Investment in the United States (CFIUS), and a separate look by the Pentagon’s Defense Security Service.
BAE and EADS have hired outside counsel to shepherd the deal through the U.S. process, and both companies have been in close touch with Pentagon officials about the complex negotiations that would create the world’s largest aerospace company.
U.S. officials say they must see the proposed ownership structure before launching a detailed evaluation.
Sources close to the process say no showstoppers have come up in the companies’ preliminary talks with the Pentagon, but that could change if France and Germany get stakes and rights that are seen as giving them control over the company.
U.S. law deliberately avoids spelling out an exact definition of “control,” leaving that up to the interpretation of the Pentagon and other U.S. agencies, which weigh factors such as voting interests; any special shares or contractual arrangements; who has control over board appointments; approval over major expenditures; and even who funds workers’ pensions.
U.S. experts say a holding of 9.9 percent or less would put the foreign governments on the same footing as any investor with deep pockets buying shares on the open market.
That could help persuade Pentagon officials to agree to wrap EADS’ U.S. operations into BAE’s existing special security agreement (SSA), rather than imposing a more onerous proxy agreement, which would sharply limit the parent company’s insight into U.S. work, or insisting on divestments, they said.
BAE officials also want to reduce the “interlock” between the management and board of the combined company and a planned UK-based holding company that would have its own robust security agreement with the British government.
The companies’ current plan is for that UK holding company to oversee the U.S. unit, which would effectively put another layer between it and the parent company, further limiting an possible control by the government shareholders.