* Deal would create world's No.1 aerospace and defence firm
* France, Germany and UK battling over state role in group
* Britain concerned over national security and jobs
BIRMINGHAM, England, Oct 7 Britain will block
the proposed $45 billion merger between EADS and BAE
Systems if key "red line" priorities are not met,
defence minister Philip Hammond said on Sunday, just three days
before a deadline for detailing the deal.
Tensions over the supermerger have spilled into the open in
recent days as France, Britain and Germany jockey over the role
of the state in what would be the world's largest aerospace and
"We want to see this company ... prospering as a commercial
business, focussed on doing things that are right for the
business, not beholden to or controlled by any one government,"
Hammond told BBC radio.
"It is not necessary to have no French or German government
interest in the company. It is necessary to reduce that stake
below the level at which it can control or direct the way the
company acts," he said.
EADS and BAE announced plans for a merger last month, but
their efforts have become snagged on differences over control
between France and Germany, while there are also political
concerns about jobs.
"We have made very clear that we do have red lines around
the BAE-EADS merger and that if they can't be satisfied then we
will use our special share to veto the deal," Hammond said,
referring to Britain's so-called "golden share" in BAE that
gives it the power to block a transaction involving the company.
Britain would judge the deal against how it protected the
country's security and jobs, added finance minister George
"Our priorities are of course the national security of the
United Kingdom, second: jobs and investment in the UK," Osborne
told Sky television.
EADS is controlled by a pact between the French state and
two core industrial shareholders, France's Lagardere and German
carmaker Daimler. The trio collectively owns 45 percent.
France wants to keep a stake but will not rule out adding
more, while Germany wants to match France's role.
Investors in both companies are also concerned about the
level of political influence within the combined group, fearing
it could hamper its chances of winning business from other
EADS chief executive Tom Enders sees the tie-up as a chance
to reduce government influence within a more commercial
Enders and his counterpart at BAE Systems, Ian King, have
vowed that the new company would have normal "governance
A person familiar with the negotiations said one of the
points in dispute was where the new group would be based.
The German government would like an important part of the
company, or indeed possibly its headquarters, to be based in
Germany, the source said, adding: "It's like a round of
Time is running out before a UK regulatory deadline of Oct.
10 for a blueprint of the deal, which affects national security
interests on both sides of the Atlantic.