Hammond warns French and Germans over BAE

Marion Dakers
BAE Systems and EADS’s merger plans face a number of political obstacles that could cause the defence giants to ask the Takeover Panel for an extension ahead of a deadline this Wednesday.

Defence secretary Philip Hammond warned yesterday that the French and German states must reduce their stakes in EADS if Britain is to approve the tie-up, telling the BBC it is a “red line” issue.

“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.

Hammond added that the UK could use its golden share in BAE to block the deal if the government is unhappy with the terms. 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 per cent.

Chancellor George Osborne also flagged concerns about keeping staff in the country, telling Sky: “Our priorities are of course the national security of the United Kingdom, second: jobs and investment in the UK.”

And Prime Minister David Cameron has come under pressure to intervene. A letter signed by 45 MPs has urged the PM to “safeguard Britain’s national security and economic interests” and ensure France and Germany do not have too much influence over the enlarged firm.

There are also grumbles about where the new company would be based, with reports suggesting that German politicians want an extra headquarters in Munich as part of the deal.

The firms said over the weekend that “constructive talks” between the three governments were continuing.

“We remain convinced that we have made an excellent offer for Europe,” a spokesperson for EADS said.