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French firm questions proposed merger between EADS and BAE Systems

Published:  2 Oct at 9 AM

A proposed merger between EADS and BAE systems has hit a stumbling block as Lagardere a major shareholder in the European giant has expressed reservations regarding the deal. As it stands, a decision about the tie-up needs to be made by 10 October because of a deadline set by the UK’s Takeover Panel. However, a request for an extension from both companies is likely.

EADS chief executive, Tim Enders, has called the £45 billion merger a great opportunity and Ian King, boss of BAE, has also called for support for the deal. However, a deal is dependent on the governments of several European countries not blocking the move.

The government in the UK has a golden share in BAE. This is in place to make sure the company is not vulnerable to aggressive takeovers as parliament has the authority to block a deal.

The Ministry of Defence is currently looking at what impact a merger might have on the UK. A spokesman for French media group Lagardere said the deal offered strategic and industrial potential, adding that it still was not clear where the value for EADS would be created.

As well as owning 7.5 per cent of EADS, Lagardere also has an agreement in place to represent the French government which owns a significant amount of stock. Shares in BAE Systems have remained generally unaffected by the announcement of a possible merger, whereas EADS stock has fallen by some 17 per cent indicating that as far as the markets are concerned the deal looks better for the British company than for the Franco-German firm.