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EADs and BAE Systems merger talks see shares tumble

Published:  14 Sep at 9 AM

The proposed merger of BAE Systems in the UK with EADS, the European aerospace giant, has seen shares in both companies fall. Although BAE stock originally surged by seven per cent, the firm saw shares drop by 7.3 per cent yesterday. EADS shares initially lost five per cent of their value and have since dropped a further 10.2 per cent.

The sensitive nature of a tie-up between the two companies means that governments holding shares will have to investigate the proposal carefully. The government in the UK has a golden share in BAE, which means it can block a takeover if necessary.

Airbus owner EADS has defence and aerospace operations in Spain, France and Germany. Its main stake holders are Daimler in Germany, which owns 22 per cent, Lagardere in France, which, along with the country’s government, owns 22 per cent, and the Spanish government, which holds 5.5 per cent.

Airbus chief Fabrice Bregier told workers at the planemaker that a merger would provide them with a more powerful employer and strengthen the company. Lagardere and Daimler both said they were currently looking at the details of the proposal.

If the merger were to go ahead, the company would overtake US competitor Boeing. Calculations based on figures published last year indicate that EADS and BAE would have sales of around $93 billion compared to Boeing’s $68.7 billion.