FRANKFURT — and are facing significant political headwinds in their efforts to persuade European governments of the merits of their planned merger.
The two companies have an Oct. 10 deadline for the completion of their talks. Given that France is a direct shareholder in EADS, Germany is represented indirectly through the current Daimler shareholding and the U.K. has special rights at BAE Systems, that also means in reality that governments have to make up their minds within the next three weeks.
“We are discussing it and assessing what has been announced by EADS and BAE,” German Chancellor Angela Merkel told journalists at the regular government press conference in Berlin. She also indicated that her government is “in contact with others” and that Franco-German relations play “an important role.”
EADS and BAE Systems are understood to have offered far-reaching concessions to the three main governments (France, Germany, U.K.) in an effort to persuade them to approve the deal. They are offering veto rights through golden shares to be issued to each of them. In addition, EADS and BAE Systems are including employment guarantees to dispel concerns that work might be shifted elsewhere.
According to industry sources, EADS CEO Thomas Enders would become CEO of the new group, once it was set up.
The civil part of the business would be run from Toulouse, whereis based, while the defense segment would be headquartered in the U.K. The companies did not comment officially.
There are clear signs that France will not sell its 15% stake in EADS in spite of the veto rights it may get as part of the proposal.
Whether Germany will buy up to 15% of EADS before the end of this year, as planned, is unclear so far. That move was foreseen to balance power between France and Germany within EADS.
France also has to evaluate howand would be affected by the combination of EADS and BAE. The government has been highly supportive of Dassault in many cases, most recently the Indian fighter campaign in which the company eventually prevailed over the and the .
If Enders had hoped that government influence might be reduced as part of the BAE Systems deal, he might soon be proven wrong. Instead, he might end up with an additional government shareholder (Germany) and more veto rights for the countries. In addition to France’s 15%, Spain’s government holding Sepi has a 5.4% stake in EADS.
Another key issue is going to be whether the European Commission would be ready to accept the golden share setup that EADS and BAE Systems have been proposing. The commission has been highly critical of such special rights and has been trying to cut back on them in other industries. They are possible, however, when it comes to defense interests. A spokesperson said the commission has yet to be notified and thus it was “too early to comment on this case and its possible outcome.”