BAE Systems has indicated that it will withdraw from merger negotiations with EADS unless the enlarged company is free from political interference.
The defence engineering firm announced on September 12 that it is in discussions with EADS, the pan-European aerospace company, regarding a potential merger.
EADS’ management has indicated a willingness to remove political influence from the enlarged group, but it remains to be seen if the French or German governments are willing to relinquish their strategic holdings in the company.
The German government and the French administration effectively control a 22.5% stake in EADS.
BAE and a number of analysts consider the French government to be the largest potential obstacle to the deal. However, French president Francois Hollande is seen as more open to the merger than his predecessor.
According to sources, EADS’ chief executive Tom Enders is keen to minimize the influence of the German and French governments and would like to the two governments’ shareholdings to be reduced to less than 10%.