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UPDATE 4-EADS/BAE merger demands erupt as talks intensify

* EADS shareholder Lagardere urges deal revamp

* German sources warns leaks could ruin merger

* UK could use "golden share" to block deal unless terms met

* Lagardere, EADS CEOs hold meeting

(Adds details, background) By Gernot Heller and James Regan

BERLIN/PARIS, Oct 1 (Reuters) - EADS and BAE Systems battled to rescue their $45 billion merger plan from a barrage of competing interests on Monday as governments and shareholders staked out positions in tense negotiations to try to forge the world's largest arms firm.

Arnaud Lagardere, the leading French industrial shareholder of Airbus parent EADS, threw an unexpected spanner into the plans by demanding the financial terms be reviewed, setting off a frenzy of briefings and counter-briefings from all sides.

"Despite the industrial and strategic potential attributed to it, this plan has not yet demonstrated that it was creating value for EADS," Lagardere's media firm said in a statement shortly before Paris trading.

The comments increased pressure on EADS Chief Executive Tom Enders and BAE Systems counterpart Ian King hours after they urged investors to back the deal, which has become mired in demands from European governments and volatile share prices.

Writing in an article published by three European newspapers, Enders and King dismissed what they termed "myths and misconceptions" about the plan, which has split industry and politicians ahead of an Oct. 10 deadline to present its terms.

EADS Chief Executive Tom Enders embarked on shuttle diplomacy, meeting Lagardere in Paris and senior UK officials in London where he was expected to defend the merger plans at a previously scheduled speaking engagement in the British capital.

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ For analysis on EADS shareholder pact: Analyst interview on deal: For Breakingviews on EADS-BAE merger: ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

Experts on Europe's fractious defence industry said Lagardere's criticisms and a volley of remarks from Germany and elsewhere seemed designed to protect negotiating positions ahead of arm-twisting talks in coming days.

"It is like trade unions laying out their maximum demands before a pay negotiation," a person close to the talks said.

"LEAKS CAN RUIN EVERYTHING"

German Defence Minister Thomas de Maiziere expressed concerns about a rise of potentially harmful rhetoric.

"We don't want to add further fuel to the debate ... with more speculation. All the information leaks can lead to a result but they can also ruin everything.

"The ministers won't be party to this. Therefore, you can't make any assumptions about our positions. What you can assume is that we will find a common position. But it doesn't only depend on us."

A steep drop in global defence spending has prompted EADS and BAE to re-examine a tie-up to create a European giant to compete with U.S. rivals such as Boeing which almost came about in the late 1990s.

Lagardere, the French government and German automaker Daimler are part of a core shareholder pact which underpins EADS, which was formed in 2000 from major aerospace companies in Germany, France and Spain. Under the complex pact, Lagardere represents the combined French stake.

EADS and BAE have promised a "normalised" corporate governance structure under any merger, something considered essential to winning backing from UK and U.S. governments.

The joint CEO article touted the benefits of the deal but made scant reference to core shareholders who can block it, and Lagardere's statement served to remind the company and French government that its voice must be heard in any compromise.

Lagardere has said it wants to sell its 7.5 percent stake in EADS and will be keen to get the best valuation in any deal. It called the current proposed terms, which would give EADS shareholders 60 percent of a new company, "unsatisfactory".

"I think they just want the right parity for exit," one London-based arbitrage trader said of Lagardere's statement.

EADS shares have shed more than 4 billion euros ($5.2 billion) in value since news of the talks broke last month due to investors' misgivings. That means Lagardere's 7.5 percent stake has lost more than 300 million euros in value.

EADS and BAE both rose around one percent on Monday. "GOLDEN SHARE"

Any deal would require agreement on the rights and/or ownership role of the British, German and French governments. Jobs are also an important component of the talks.

One source in Germany, who is privy to the negotiations, said a deal collapse was now more likely than reaching agreement among the three governments which all were pushing their interests in the complex commercial and political negotiations.

A UK defence ministry source said Britain would use a "golden share" in BAE to block a merger unless the new group's defence business is based in the United Kingdom with a British CEO. Other sources said this would not be a problem.

A source close to Daimler, meanwhile, said the company was keen for the matter to be resolved before next week's deadline, warning against lengthy talks.

"It has to be in the interest of EADS shareholders that there is certainty by Oct. 10 whether a transaction can be carried out or not," the source said. "A needlessly drawn-out discussion would be harmful to both EADS and its shareholders."

German magazine Der Spiegel said on Sunday that France and Germany had agreed that each should hold a 9 percent diluted stake in the merged entity, citing high-level civil servants.

A spokesman for German Economy Minister Philipp Roesler declined to confirm or deny the report.

French officials were not immediately available to comment, but sources familiar with the matter denied the two sides were in agreement on the shareholding or how their relative interests should be guaranteed.

($1 = 0.7773 euros)

(Additional reporting by Blaise Robinson and Leila Abboud in Paris, Arno Schuetze in Frankfurt, Tim Hepher in London, Frank Siebelt in Germany.; Editing by Jason Neely and David Stamp)

((james.regan@thomsonreuters.com)(+33 01 49 49 53 84)(Reuters Messaging: james.regan.thomsonreuters.com@reuters.net))

Keywords: LAGARDERE EADS BAE/

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