Belfast Telegraph

Germany halts £28bn defence merger plans

By Jamie Grierson and Alan Jones

Plans to create a European aerospace and defence giant are in tatters after German opposition scuppered the £28bn deal.

The proposed merger of BAE Systems and EADS would have created a company with combined sales of £60bn and more than 220,000 staff, with around 52,000 in the UK alone.

But after days of political wrangling, the two firms were forced to ditch the bid, giving rise to fears over job security at BAE, which operates from 50 UK locations.

BAE chief executive Ian King said the company was "obviously disappointed" but insisted it was "financially robust" and remained confident about its future.

Unions, defence analysts and Labour all raised concerns, saying that the merger would have created a stronger company and guaranteed jobs in the long term.

David Reeths, of defence analyst IHS Jane's, said: "This will mean that job guarantees that would have been part of the deal will not be made."

The tie-up would have improved BAE's exposure to commercial markets - as EADS is an Airbus aircraft manufacturer - in a climate when public defence spending is declining.

BAE, which operates in UK locations from Glasgow to Portsmouth, reported a 14% fall in sales last year as military spending in the US and UK was cut.

Unite, the union, urgedBritain to strengthen its "golden share" in BAE by taking an active stake in the company.

The union, which represents more than 30,000 skilled workers across the two companies, had been pressing for guarantees over jobs if the merger had gone ahead.

National officer Ian Waddell said: "A merger, with a jobs guarantee, would have created a strong new company that could have protected the UK's long-term interests."

Germany is understood to have dealt the final blow to the deal amid reports Chancellor Angela Merkel opposed the merger.

France has a direct stake in EADS, while German influence is held through a 22% stake owned by car maker Daimler.

Ms Merkel and her government are thought to have insisted on a 9% stake in the enlarged group to match France's holding. It is thought that America had concerns over sensitive military assets transferring from British ownership to a European business.

BAE, which has a £40bn order book, insisted the proposed merger was an opportunity rather than an "absolute necessity".