EADS rebuffs merger collapse report, cites progress

PARIS, Oct 9 (Reuters) - EADS rejected a Germannews agency report that merger talks with BAE Systemshad collapsed and confirmed progress between Britain and Franceover the deal.

"We are surprised to see the reports from Berlin. Only thismorning, we have received the information that France and the UKhave made significant progress on the issue that was blockingthe negotiations for the last few days," an EADS spokesman saidin an emailed statement.

"The two companies will discuss the situation and possiblesteps forward this afternoon."

Shares in EADS rose sharply on the report by German newsagency DPA and fell back after the EADS statement.

BAE declined comment.

Reuters reported earlier that Britain and France had madeprogress in talks over a possible cap on state shareholdings inany merger between EADS and BAE Systems , butthat any deal must overcome possible opposition from Germany.

(Reporting by Tim Hepher)

((tim.hepher@thomsonreuters.com; +33 1 49 49 54 52; ReutersMessaging: tim.hepher.thomsonreuters@reuters.net))