10 Oct 2012 By Telegraph Staff
The board of BAE Systems and EADS are meeting this morning amid growing doubts that they can salvage the £28bn mega-merger after reports that Germany remains the chief obstacle.
Shares in BAE Systems fell 1.1pc in early trading, while those of EADS were flat as investor awaited an announcement, with some commentators speculating that it could come around lunchtime.
Tom Enders, chief executive of EADS, and Ian King, the boss of BAE, must consider whether enough progress was made in talks between France and Britain about state ownership in the enlarged company and whether Germany can be appeased.
At stake is the creation of a market leading defence and civil aviation company with combined sales of £60bn and more than 220,000 staff - 52,000 in the UK alone.
The Takeover Panel has given the companies until 5pm to decide on the future of the controversial deal, although they could still ask for an extension if they believe merger has a chance to succeed.
Sources close to the companies said it is “50/50” whether an extension will be requested.
Reports claim that Germany is worried about being marginalized as a result of the merger. At one stage it was said to want the headquarters of the combined group to be based in Germany not France.
The future of French and German government stakes in the combined group have been a major sticking point, with Britain opposed to the two countries potentially holding a combined 27pc when it would have none.
Investors have also opposed the deal, with 30pc of BAE investors unhappy with deal, especially about how it will affect crucial business defence links with the United States. EADS investor Legardere also wants a better deal for its investors.
The boards of BAE and EADS met separately last night after a day of political wrangling between the British, French and German governments.
Philip Hammond, the Defence Secretary, and Jean-Yves le Drian, his French counterpart, are understood to have reached an outline agreement whereby France would be able to acquire more shares in the company above its proposed 9pc holding but that the level of state ownership would be capped.
However, the odds seem stacked against the deal since even if the UK, France and Germany agree a deal, it still must gain US approval.
BAE shares have fallen 1.9pc since talks of the merger were revealed on September 12. EADS has dropped 12pc.