BAE offers to ringfence units to sweeten deal

DEFENCE firm BAE Systems is willing to ring-fence politically sensitive projects in order to gain government approval for its merger with Airbus owner EADS.

A source with knowledge of the deal told City A.M. that BAE is working to ensure national security protection agreements are in place with partner countries in an attempt to ease concerns about unnecessary technology transfer during the creation of a pan-European manufacturing giant.

In the UK this could see the Trident nuclear deterrent replacement programme and Detica, a cyber-security firm that works on sensitive material for the UK government, kept under exclusively British control.

The source also explained that a key part of the merger process will involve convincing the French and German governments to adopt similar agreements in return for abandoning their existing ability to veto EADS' strategy.

Almost all production jobs are expected to be safe but there will be "some rationalisation" at head office level. British employees are thought to be more at risk because the combined firm is likely to be based in France.

The £29bn deal, which became public knowledge following a leak on Wednesday, would create the world's biggest aerospace firm but needs approval from governments in the UK, Germany, France and US amongst others.

It is understood that relevant national authorities have been heavily involved in the discussions, which have been underway for some months.