September 16, 2012 / 3:24 PM / 5 years ago

BAE would ring-fence defense projects to calm fears of EADS deal

LONDON (Reuters) - British defense group BAE Systems (BAES.L) is prepared to ring-fence projects such as the Trident nuclear submarine program to calm growing fears over the impact on security and employment of its planned merger with European aerospace giant EADS EAD.PA.

A source close to BAE told Reuters on Sunday that Trident and Detica, BAE’s cyber security arm which handles sensitive government information, were “exactly the sort of projects” that BAE would seek to protect under its own control should a deal to create the world’s biggest aerospace firm come off.

The two companies face swelling political obstacles to the 30 billion pound ($49 billion) deal, which is being driven largely by the need of U.S. and European defense firms to offset the impact of shrinking national military budgets.

The Sunday Telegraph newspaper cited senior Whitehall sources as saying that BAE had been given a list of “red line” issues focusing on British defense contracts.

Britain had raised a series of national security concerns arising from the deal and would block it if they were not resolved, it said.

There are also concerns over 10,000 jobs connected to the EADS Airbus operations in Bristol and north Wales which could be put at risk by the merger as the new headquarters of the merged company would probably be in France.

The Conservative-led coalition government had made it clear it wants the issues dealt with before lifting the threat of using its “golden share” to block the merger, the paper reported.

It said Britain in particular wants safeguards over the future of the Trident nuclear submarine program, built by BAE in Cumbria, northern England.

    Meanwhile, the Independent on Sunday reported thousands of British jobs would be slashed if the government failed to back the deal.

    A source close to BAE told Reuters it would “always match the workforce to the workload”. The same source added that, if the deal does go through, job losses would be minimal as there is not much overlap between the two businesses.

    Britain’s Ministry of Defence and the Department of Business, Innovation and Skills declined to comment on the reports. The government said on Wednesday it wanted to “ensure that the UK’s public interest was properly protected”.

    Britain in May moved closer to renewing its Trident nuclear weapons system, awarding 350 million pounds worth of contracts to design a new generation of submarines, mainly to BAE. [ID:nL5E8GM9K2] ($1 = 0.6155 British pounds)

    Editing by Anthony Barker

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