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BAE Tie-Up Bad for UK, Warns Darling

Jim Pickard and Andrew Parker
Friday, 5 Oct 2012 | 12:37 AM ET

Alistair Darling has made a forceful intervention in the plans by EADS to combine with BAE Systems, saying British interests were bound to suffer because the UK government would have no equity stake in the enlarged group.

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The former chancellor of the exchequer told the Financial Times he saw the logic for a new European civil aerospace and defence giant to compete with Boeing of the US.

But he said it was “totally unacceptable” that the French and German governments were pushing to have equity stakes while Britain would not.

“We will be taken to the cleaners,” said Mr Darling, who was also business secretary when the Labour party was in power. “I don’t see how you could have a large new company like this with the French and German governments having large direct and indirect stakes and we have none.

“I would prefer that all three governments had minimal stakes. There is a danger that decisions in the defence and the commercial businesses could be taken on the basis of politics rather than what is best.”

Mr Darling’s comments highlight one of the biggest hurdles that Tom Enders, EADS’ chief executive, has to surpass if he is to conclude the €34.7 billion tie-up with BAE , the UK defence group.

The French and German governments, in effect, control EADS through a combination of direct and indirectly held stakes, and both appear keen to retain significant equity in the enlarged group.

Mr Enders has been a longstanding critic of EADS’ state shareholdings, but it is far from clear that he can secure governance arrangements at the combined group that would curb political interference.

Mr Darling, who is no longer a Labour front bench spokesman, also said he needed greater reassurance that BAE’s defence contracts with the US government would be maintained after any deal with EADS.

The Labour party has taken a less forthright position on the deal, with Chuka Umunna, shadow business secretary, saying the coalition government should ask for certain safeguards around jobs and strategic interests. David Cameron, the prime minister, is “broadly supportive” of the proposed deal, because he sees the commercial logic, according to government insiders.

While there has been some criticism from a number of Conservatives MPs on the rightwing of the party, including David Davis, other figures, including Liam Fox, the former defence secretary, are in favor of the deal.

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