22nd Oct 2016

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.

Dear EUobserver reader

Subscribe now for unrestricted access to EUobserver.

Sign up for 30 days' free trial, no obligation. Full subscription only 15 € / month or 150 € / year.

  1. Unlimited access on desktop and mobile
  2. All premium articles, analysis, commentary and investigations
  3. EUobserver archives

EUobserver is the only independent news media covering EU affairs in Brussels and all 28 member states.

♡ We value your support.

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.


Europe ready to tackle Greek debt relief

The Greek government has built and broadened alliances in EU institutions and member-states that acknowledge the need to restructure the debt and deliver another economic model for the eurozone.

News in Brief

  1. Canada and Wallonia end talks without Ceta deal
  2. Juncker hopes for Canada accord in 'next few days'
  3. Romania drops opposition to Ceta
  4. Difficulties remain on Ceta deal, says Walloon leader
  5. Brexit could lead to 'some civil unrest' in Northern Ireland
  6. ECB holds rates and continues quantitive easing programme
  7. Support for Danish People's Party drops, poll
  8. Spain's highest court overturns Catalan ban on bullfighting

Stakeholders' Highlights

  1. EFADraft Bill for a 2nd Scottish Independence Referendum
  2. UNICEFCalls on European Council to Address Plight of Refugee and Migrant Children
  3. ECTAJoin us on 9-10 November in Brussels and Discover the new EU Digital Landscape
  4. Access NowCan you Hear me now? Verizon’s Opportunity to Stand for Global Users
  5. Belgrade Security ForumMeaningful Dialogue Missing Not Only in the Balkans, but Throughout Europe
  6. EASPDJoin the Trip! 20 Years on the Road. Conference & Photo Exhibition on 19-21 October
  7. EuropecheEU Fishing Sector Celebrates Sustainably Sourced Seafood in EU Parliament
  8. World VisionWomen and Girls Urge EU Leadership to Help end Gender-based Violence
  9. Dialogue PlatformIs Jihadism Blind Spot of Western Intellectuals ? Wednesday 26 October
  10. Belgrade Security ForumGet the Latest News and Updates on the Belgrade Security Forum @BelSecForum
  11. Crowdsourcing Week EuropeMaster Crowdsourcing, Crowdfunding and Innovation! Conference 21 November - 10% Discount Code CSWEU16
  12. EJCEU Parliament's Roadmap for Relations with Iran a Massive Missed Opportunity