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BAE-EADS Deal on Summit Agenda

Gerrit Wiesmann in Berlin, Hugh Carnegy in Paris and Carola Hoyos in London
Wednesday, 19 Sep 2012 | 8:40 PM ET

François Hollande and Angela Merkel will seek to agree a joint position at a meeting on Saturday on the €35 billion combination of EADS and BAE Systems to create the world’s largest defense and aerospace company by revenue.

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Approval by the French president and German chancellor is crucial to the deal on which EADS hopes to make an announcement soon. The heads of state are due to meet in Ludwigsburg in Germany to assess the eurozone crisis but the EADS-BAE deal will be discussed.

Tom Enders, chief executive of EADS, on Wednesday broke his silence for the first time since the companies confirmed their talks in a statement published a week ago, hinting the deal was progressing well.

He wrote in an email to staff: “We are in good shape to be able to provide further details to the market and our employees probably soon.”

Mr. Enders added the companies were having “constructive and advanced discussions with all relevant governments and are trying to accommodate their concerns and national security interests as best as possible within the framework of our envisioned transaction”.

But he warned: “Good governance is a key prerequisite for both companies, it’s the ‘go’ or ‘no go’ for this project!”

The tie-up of the two companies would eradicate Paris and Berlin’s day-to-day influence over EADS, but allow them, Madrid and London to maintain the right to veto corporate decisions that go against their national security.

Berlin has been in close contact with the French and UK governments, and is now looking for first decisions to Paris, which, unlike Berlin, is a direct shareholder in EADS.

Executives at the two companies believe they are close to a firm agreement, having largely hammered out the structure and membership of the new company’s board.

But people close to the deal warned nothing was guaranteed.

Ms Merkel said on Wednesday: “The various checks are currently being carried out on the BAE-EADS merger by all governments.”

In an indication that agreement with governments remains some way off, Bernard Cazeneuve, French minister of European affairs, said late on Tuesday in a television broadcast that there remained “lots of technical obstacles” that “risk blocking the operation”.

Asked on Wednesday whether the French government had agreed in principle to a deal, Pierre Moscovici, finance minster, replied: “No.”

He added: “We are examining the issue.”

Boeing, US rival to the potential merged group, on Wednesday gave the clearest indication yet that it could challenge the deal, saying it shared the concerns others have raised.

Even if the two companies get tacit approval from the governments, the deal will not go through until lawmakers have had their say.

Additional reporting by Anousha Sakoui and Jim Pickard

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