PARIS/FRANKFURT The bosses of EADS EAD.PA and BAE Systems (BAES.L) sought to reassure investors over the benefits of their planned $45 billion merger amid what they described as "myths and misconceptions" over the creation of a pan-European defense giant.
BAE Systems chief executive Ian King and Tom Enders, his counterpart at Airbus parent EADS, said in a joint newspaper article that the plan to join forces was born out of "opportunity, not necessity," and would create growth.
"With the necessary political will and support, management determination and proper governance, BAE Systems and EADS can produce a whole that is greater than the sum of its parts," they wrote in the article to be published in three European newspapers on Monday.
EADS shares have fallen 17 percent since September 12, when word of the negotiations was leaked. After shedding initial gains, BAE shares are back to where they were beforehand.
Some analysts have said the two European companies are being forced to combine because of steep cuts to national defense spending and have criticized what they see as a lack of synergies, the cost and revenue benefits usually targeted in a merger.
The two chief executives said the wider group, which would be the world's largest aerospace and defense company, would better be able to ride the cycles of civil aviation demand and defense spending.
"The rationale that drives this transaction is growth, not contraction," they wrote.
UK-based BAE Systems is Europe's largest defense contractor and Airbus, which dominates the finances of EADS, is the world's largest commercial planemaker ahead of U.S. rival Boeing Co (BA.N).
BAE has started re-investing in the buoyant commercial sector after pulling out of Airbus in 2006, while EADS has long sought to expand its defense activities, which remain a long way behind the successful passenger aircraft division.
The article was due to be published as France and Germany, the main forces within EADS, seek to defend their respective roles inside the new company.
Germany, which presented its demands on Friday, has been pushing for equality with France, which has a 15 percent stake and special rights through a shareholder pact.
However, those rights are set to disappear if the merger goes ahead and would be replaced by a special share whose exact properties have yet to be publicly defined.
Pressure on the governments involved is rising amid signs that the pact could unravel quickly in the absence of a deal, leaving France with a stake but no right to be heard on strategy and no voice for Germany.
King and Enders vowed that the new company would have "governance structures which would enable it to operate in a normal commercial manner and which confers the same rights on all shareholders, large and small."
German magazine Der Spiegel on Sunday cited high-level civil servants as saying that France and Germany had agreed to each hold a 9 percent diluted stake in the merged entity, equivalent to a 15 percent undiluted stake in EADS.
The Franco-German agreement would form the basis for their negotiations with the British government in talks this week, the magazine added.
A spokesman for German Economy Minister Philipp Roesler declined to confirm or deny the report.
"The talks are continuing and the relevant questions are still being examined," the spokesman said.
French officials were not immediately available to comment on the Spiegel report, but sources familiar with the matter denied that the two sides were in agreement on the shareholding or how their relative interests should be guaranteed.
France has so far been cautious about agreeing to German overtures aimed at forging a common position as both countries defend their interests in the successor to EADS, which has often been a source of tensions since it was set up in 2000.
Analysts say there is little overlap between the two companies, which may be good news for getting past antitrust regulators, but not so encouraging for deriving financial gains.
"The complete lack of apparent synergies is the most worrying part of the deal," said Agency Partners managing partner Nick Cunningham.
There would be few benefits in purchasing costs since each company is already big and only limited cost synergies since the main project on which they work together, the Eurofighter combat jet, is near the end of its development cycle, he said.
A German government source told Reuters on Friday that Berlin will present France with a list of proposals, agreed by Chancellor Angela Merkel's office and the Economy Ministry, that aim to preserve a balance of power between the two countries in the new company.
France directly owns 15 percent of EADS, the maker of Airbus jets, and wants to retain its right to influence group strategy, currently conducted through a complex pact with 7.5-percent shareholder Lagardere (LAGA.PA).
Germany is not a direct shareholder but sees the transaction as a chance to tighten its grip on a stake currently held by Daimler AG (DAIGn.DE) and a group of banks.
The German source gave no further details, but his comments confirmed a newspaper report on Friday which also said Germany was ready to buy up the shares of Daimler and the banks via the state development bank KfW if France kept its own stake intact. (Additional reporting by Kerstin Doerr and Michael Nienaber in Berlin; editing by Patrick Graham, G Crosse)