Thursday

21st Sep 2017

Giant defence merger faces hurdles in Britain, France and Germany

State control and European-based jobs are the main sticking points in a planned merger of Eads, the Franco-German company producing Airbus planes and BAE Systems, Britain's biggest defence contractor.

The British parliament on Monday (24 September) launched an inquiry into the would-be €35-billion-merger to create the world's largest defence and civil aviation firm.

Thank you for reading EUobserver!

Subscribe now and get 40% off for an annual subscription. Sale ends soon.

  1. €90 per year. Use discount code EUOBS40%
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

If you already have an account click here to login.

  • The merger of BAE Systems and Eads would create the biggest defence and aviation company in the world (Photo: Defence Images)

"The merger of two such large defence contractors would have a significant and strategic impact on their relationships with UK, US and European governments. It could also radically alter the defence industrial base in these countries," said the defence committee in the British parliament, according to the Telegraph.

After announcing the merger plan last month, the two companies have until 10 October to table a formal proposal for the deal.

But with France and Germany also signaling unease about the plan, the companies are expected to arrange an extension to the deadline.

A German document, seen by Reuters, lays out the worries of the economy ministry about possible takeovers and job losses in Germany.

Similar concerns have been voiced in France, where the state wants to retain control over the future defence giant.

Eads and BAE Systems have promised the governments of France, Germany and the UK a "golden share" in the new entity which could be used to block any potential future takeovers.

But both Berlin and Paris are sceptical about the prospects of the legal brake, which has been struck down in previous merger cases in EU courts.

With some 50,000 Eads employees in Germany alone, possible job losses are also of concern, despite assurances by the two companies that the link-up would not see cuts to staff.

Meanwhile, Berlin is unhappy with plans to value Eads at 60 percent of the new company, saying the figure should be closer to 70 percent.

The British government is concerned that too much Franco-German control over the new company could jeopardise BAE Systems' contracts with the Pentagon.

The British firm supplies parts to the F-35 fighter jet produced by Lockheed Martin and more than 60,000 cockpit and cabin parts to Boeing, Airbus' US competitor.

Eads chief executive Tom Enders will appear before German parliament on Wednesday to defend the plans.

The same day, defence ministers from Germany, France and UK are expected to discuss the matter at an EU meeting in Nicosia. The governments need to give their blessing for the merger to go ahead.

A meeting on Saturday between French President Francois Hollande and German Chancellor Angela Merkel failed to produce a definite endorsement of the merger.

EU takes time to ponder tax on tech giants

The EU commission published a paper that outlined several options on how to increase tax income from internet companies' activities, but fell short of proposing legislation.

EU commission changes gear on trade

The EU executive seeks new deals with Australia and New Zealand, while aiming to overhaul the global investment protection system. It also wants to screen foreign investments.

Analysis

Bayer-Monsanto merger could reshape EU food sector

Mega-mergers in the food sector have become commonplace, but EU laws do little to help it keep check on the impact this could have on the environment, public health, and food security.

News in Brief

  1. Le Pen's right-hand man leaves National Front
  2. Spanish PM calls on Catalan leaders to 'stop escalation'
  3. Dutch government to appeal Srebrenica ruling
  4. Verhofstadt: Northern Ireland could stay in single market
  5. Catalan leader decries Spanish government intervention
  6. Hungary set for fresh campaign against public enemy Soros
  7. Iceland's PM leads in polls ahead of October elections
  8. Erdogan demands Iraqi Kurds cancel referendum

Stakeholders' Highlights

  1. Mission of China to the EUGermany Stands Ready to Deepen Cooperation With China
  2. World VisionFirst Ever Young People Consultation to Discuss the Much Needed Peace in Europe
  3. European Jewish CongressGermany First Country to Adopt Working Definition of Antisemitism
  4. EU2017EEFour Tax Initiatives to Modernise the EU's Tax System
  5. Dialogue PlatformResponsibility in Practice: Gulen & Islamic Thought
  6. Counter BalanceHuman Rights Concerns Over EIB Loan to the Trans Anatolian Pipeline Project
  7. Mission of China to the EUChina Leads the Global Clean Energy Transition
  8. CES - Silicones EuropeFrom Baking Moulds to Oven Mitts, Silicones Are a Key Ingredient in Kitchens
  9. Martens CentreFor a New Europeanism: How to Put the Motto "Unity in Diversity" Into Practice
  10. Access MBAGet Ahead With an MBA Degree. Top MBA Event in Brussels
  11. Idealist QuarterlyIdealist Quarterly Event: Building Fearless Democracies With Gerald Hensel
  12. Mission of China to the EUPresident Xi Urges Bigger Global Role for Emerging Economies