BAE Systems & EADS (Ou "Défense Européenne Commune" ?)

[Vous devez être inscrit et connecté pour voir ce lien], has demanded that Germany, France and the UK honour contracts for military equipment so that [Vous devez être inscrit et connecté pour voir ce lien] and [Vous devez être inscrit et connecté pour voir ce lien] can guarantee jobs after the aerospace and defence companies’ planned merger.

“We want credible pledges from the companies about job security but we also need credible statements from the governments about military contracts,” said Jürgen Kerner, who is responsible for defence and aerospace on IG Metall’s seven-member national executive.

The risk of job cuts and plant closures – especially in the defence sector – is a key issue for Berlin, Paris and London as they consider backing or blocking the deal. But the demand by the manufacturing union shows governments could also do something to calm fears and make a jobs pledge easier. ..............

Mr Kerner, who represents most of EADS’ 49,000 German workers, told the Financial Times that governments now had “to pledge to maintain a large part of the military contracts they have entered into”.

“That will be the only way of keeping plants in use and people in work – in Germany, in the UK and in France,” he added.

“IG Metall fully backs the intention of the bid – to have a company that is not so dependent on Airbus and to allow a consolidation of European defence businesses which should allow us at least to maintain current jobs at EADS and BAE,” Mr Kerner said.

If unions were to back the merger, they would still demand a guarantee to maintain defence jobs. Mr Kerner said this did not have to stretch to 2020, as EADS agreed with workers at Airbus, its civil airliner unit, “but the two-year period EADS has signalled recently will clearly not be sufficient”.

The unions have no formal right to veto any merger but any opposition could spur industrial action, threatening production and profits at the new company. EADS also has a strong tradition of union consultation which IG Metall wants to see maintained.

Germany hopes Saturday’s [Vous devez être inscrit et connecté pour voir ce lien], the French president, will be a big step toward a joint position between Berlin, Paris and London about the proposed merger of [Vous devez être inscrit et connecté pour voir ce lien]and [Vous devez être inscrit et connecté pour voir ce lien].
.......................Ms Merkel earlier this week said “checks were being carried out” on the two companies’ plans but refused to be drawn on which way her government was leaning: Berlin is split between officials who argue that the tie-up would make a globally competitive European aerospace and defence company that would secure jobs long-term, and those who worry about the immediate threat to precious high-tech jobs once executives were released from current political controls.

Some members of parliament who have been briefed on the matter caution that electoral tactics also play a role. With national elections looming in a year’s time, some are warning about the political fallout if German plants were to close soon.

The hope is that decisions in Paris and London will help the chancellor decide – or obviate the need for her to do so if one or both of these governments make a deal impossible. While Paris directly holds 15 per cent of EADS and the UK a golden share in BAE, Berlin has only an indirect say via the EADS stake held by [Vous devez être inscrit et connecté pour voir ce lien].

Shareholding is a key question in which Berlin sees itself dependent on Paris and London. The German government hopes to know over the weekend whether Paris wants to keep its EADS stake, which would represent 9 per cent of the new group.

Should the three governments agree on the foundations of a deal, Berlin will push for assurances on jobs. A guarantee covering a number of years – especially for German-focused defence unit Cassidian – would be seen as politically opportune. But Berlin is also aware any such pledge would be hard to enforce legally.

The three governments have spent the past few days compiling a catalogue of questions. Berlin would like the trio to agree a set of demands – a joint “yes” with conditions – which would give more weight to any pledges from EADS and BAE.

The quaint town of Henley-on-Thames, well known for its regatta, is not usually associated with the bruising business of multibillion-euro mega-mergers and City deal-making.

Yet the pretty market town, on one of the most beautiful stretches of the river Thames west of London, could play a decisive role in [Vous devez être inscrit et connecté pour voir ce lien] planned between [Vous devez être inscrit et connecté pour voir ce lien], the UK defence company, and [Vous devez être inscrit et connecté pour voir ce lien], Europe’s biggest civil aerospace group.

Henley is the headquarters of Invesco Perpetual, the UK arm of Invesco Asset Management of the US, one of the biggest money managers in the world and BAE’s largest investor with 13 per cent of the company’s shares. It is possible that size of holding could be enough to block the deal.

Neil Woodford, the company’s head of UK equities and a 30-year veteran in the stock-picking game, has held BAE’s shares for 25 years off and on and knows the company better than most.

And he is not happy, say bankers familiar with the deal.

Like many other big investors in both companies, he was angered by last week’s leak, which took them all by surprise, and is now concerned that [Vous devez être inscrit et connecté pour voir ce lien], that would boost returns. There are also serious worries over government interference in the proposed new company, given the history of French and German behaviour at EADS.

David Cumming, head of equities at Standard Life Investments and one of the few big investors to make a public statement, says: “It is a difficult deal politically because you’ve got political issues, not just Germany and France but also the UK (which will all have a say in the company), so we’re relatively sceptical.”

Other top 10 BAE investors share Mr Woodford’s concerns. “I suspect Neil’s worries are the same as ours,” says one. “We want to know about synergies, both now in cost cuts and future synergies: will a new merged company boost growth and profits? We also want to know whether this company will be run strategically or commercially. From a strategic perspective it may make sense but commercially we are not sure whether it will make money for our investors.”

For BAE shareholders, the main concerns centre on long-term prospects for dividend yields, as well as political interference.

Investors who have bought BAE shares have mainly done so for the relatively high dividend yield of 5.5 per cent, which compares with 1.7 per cent for EADS.

For EADS shareholders, worries are more about aligning themselves with what some say is an “inferior company” that will not necessarily open up the big US defence market [Vous devez être inscrit et connecté pour voir ce lien].

“We have already offloaded our shares,” says one big EADS shareholder. “We don’t like the idea of combining a commercial aerospace company with a defence company. EADS is diluting the commercial aviation story, which is a good one, with a defence story, which is a bad one.”

David Cameron is prepared to champion [Vous devez être inscrit et connecté pour voir ce lien], after being convinced the deal would benefit the British defence company and the wider British economy.

The prime minister is “broadly supportive” of the deal, according to political insiders, and sees no insurmountable barrier to BAE’s proposed link up with the European aerospace giant: “He sees the commercial logic,” said one.

Mr Cameron is also prepared to explain the deal to President Barack Obama, in an attempt to reassure the US that the deal would not [Vous devez être inscrit et connecté pour voir ce lien] or compromise its military secrets.

Although Mr Cameron has not yet intervened in the matter, the pace of diplomatic activity will escalate after Angela Merkel, German chancellor, and French president Francois Hollande [Vous devez être inscrit et connecté pour voir ce lien].

Mr Cameron is likely to discuss the issue with Ms Merkel and Mr Hollande in the coming days, officials say, focusing in particular on national security and the merged company’s governance structure.

If Mr Cameron is satisfied with the outline of the deal, British officials expect he would then endorse the merger in a conversation with Mr Obama.

France and Germany will in the coming days try to hammer out joint demands on job security and corporate strategy as talks intensify about the [Vous devez être inscrit et connecté pour voir ce lien] between Franco-German EADS and its British rival [Vous devez être inscrit et connecté pour voir ce lien].

After meeting Angela Merkel, German chancellor, in Ludwigsburg, southern Germany, François Hollande, French president, said both governments were seeking conditions covering “jobs, industrial strategy, defence activities, and our respective national interests”.

Ms Merkel said Germany and France would “stay in close contact on this subject” and pledged to table demands soon. “We know that we have to give the companies an answer in the near future,” she said at a ceremony marking the Franco-German relationship.

The unwillingness of both leaders to position themselves publicly reflects the complexity of the planned merger and of Franco-German attempts to form a joint position – ideally also including the UK government – before engaging with the companies.

While [Vous devez être inscrit et connecté pour voir ce lien], UK prime minister, is said to support the planned merger and its commercial logic, German and French leaders appear to be having a much tougher time weighing up potential near-term job losses against long-term benefits for both groups.

Franco-German deliberations are further complicated by EADS’ ownership structure, which has the French state controlling 15 per cent, French media group [Vous devez être inscrit et connecté pour voir ce lien] 7.5 per cent, and German carmaker [Vous devez être inscrit et connecté pour voir ce lien] 22.5 per cent, over which Berlin holds some sway.

EADS and BAE plan to give each of the three governments a golden share in the merged company, which would allow them to block future takeover attempts on the grounds of national security. The arrangement mirrors the UK government’s current ties to BAE.

But Berlin is worried Paris would still want to keep a direct stake, which could force Germany to maintain its shareholding in the spirit of EADS’ hallowed “Franco-German balance”. This, in turn, could upset the UK, which rejects direct political shareholdings.

Officials on both sides of the Channel expect contacts between Paris, London and Berlin to intensify in the coming days – and possibly result in direct talks between Mr Holland, Ms Merkel and Mr Cameron.

IG Metall, Germany’s powerful manufacturing union, on Thursday called upon the three governments to contribute to securing jobs by pledging to honour military procurement contracts. Recent defence spending cuts in Europe have significantly affected both companies.

[Vous devez être inscrit et connecté pour voir ce lien] and [Vous devez être inscrit et connecté pour voir ce lien], respectively Europe’s biggest civil aerospace and weapons manufacturers, are [Vous devez être inscrit et connecté pour voir ce lien] to create a European rival to Boeing of the US. EADS, owner of Airbus, would get 60 per cent of a combined company, and BAE 40 per cent.

Despite the daunting political hurdles, EADS says a deal would let it solve three big problems at a stroke: end its heavy reliance on the cyclical Airbus passenger jet business; give it entry to the until now impenetrable US defence market; and cancel the Franco-German shareholder pact that has stunted its international ambitions.

For BAE, the merger would be a sharp about-turn, letting it back into the Airbus business six years after it marched into a strategic cul-de-sac by becoming a defence-only business.

Those involved say progress for now is almost entirely up to the French, German and British governments. Paris and Berlin each have either a direct or indirect interest in a 22.5 per cent stake in EADS, while Britain has a so-called “golden share” in BAE, meaning it could block a deal on national security grounds.

.......Tom Enders, EADS chief executive and the driving force behind the deal, promised further details “probably soon”. But several company sources say government backing is essential for a deal to be fully recommended. “The politicians will go at their own pace, they won’t be hurried,” says a person close to the EADS board, who says he would not be surprised if the companies sought an extension to the October 10 deadline set by the UK takeover regulator.

All eyes are on a [Vous devez être inscrit et connecté pour voir ce lien]between Angela Merkel, German chancellor, and François Hollande, France’s president, but EADS and BAE negotiators say they will be “looking for progress” at the talks rather than full agreement.

However, a person involved in negotiations says the companies could make a more detailed “framework of agreement” statement before the governments sign off the deal if talks look like they will drag on for months, as some expect.

This is the central question for everybody, from “normal” EADS and BAE shareholders to the British and US governments.

The fact that talks have got this far without being shot down, by Paris in particular, has bolstered the confidence of Mr Enders that his audacious gamble could pay off.

A dialogue was opened up with Mr Hollande and Ms Merkel’s governments in July but one participant says it is wrong to say they have signalled tacit support for the deal. “They haven’t told us to go away ... they are all reserving their position,” he says.

The French say their chief concern relates to the operation of the “golden share” and what powers it would entail. EADS and BAE have responded that it is essential that the share only gives states the power to block hostile takeovers or take action over matters of national security. BAE directors say this is a “red line” issue, because the UK and US governments would not countenance meddling from Paris or Berlin.

There are also French worries about the possible damage to its domestic defence companies such as Dassault and Thales from establishing such a powerful rival.

The proposed special share, similar in design to the one held by the British government in BAE, would allow no investor to accumulate a stake of more than 14.9 per cent in the merged company.

With the French and Germans at present holding the power to intervene in the hiring and firing of senior executives and to influence strategic decisions, this would be a huge loss of control over an industrial asset – something Paris is not usually willing to countenance.

On the German side, most of the concerns are around jobs and some worries about London assuming the leadership of the combined company’s defence business, which within EADS has been a largely German affair.

French and German officials are eager to point out that they will be working in lock-step with each other but it is also noteworthy that both sides suggest they will follow the other’s lead on whether to give the nod. As a Paris official says: “No one wants to be seen as the one saying ‘no’ to this. They could just drag things out to try to kill it that way”.

Trade unions for their part have been relatively relaxed about the merits of a deal, with Germany’s IG Metall saying it “fully endorsed” the rationale. Its French equivalent says it has been given reassurances on jobs but would still like France to maintain its stake in EADS.

Like Ms Merkel and Mr Hollande, David Cameron, the British prime minister, has been monitoring the deal since July and has been supportive in principle.

His biggest problem may be containing the displeasure of rightwing members of his Conservative party, who are alarmed at the national security implications but also the perceived lurch towards Europe that the move represents at a political level.

“If it went through it would wreck our relationship with America,” one British lawmaker said this week.

The UK has been offered assurances that sensitive industrial installations such as nuclear submarine building will be ringfenced but is also seeking guarantees over the cybersecurity systems provided by BAE’s Detica.

So far at least senior ministers seem to have been seduced by the idea of getting back a stake in Airbus.

While the passenger jet maker still makes wings at Filton near Bristol there are regular worries about the work being lost to Spain or Germany. With a 40 per cent stake in Airbus, some of those fears would be allayed.

For those involved in the talks, this is the next biggest question after whether the French will say “Non”.

And the two factors are closely linked, with the US administration known to take a distinctly dim view of the French government’s 15 per cent stake in EADS.

“They just don’t really like the French very much” is the honest assessment of one adviser on the deal.

This week’s sabre-rattling by Boeing merely adds to the expectations of a real battle in the US over this deal. “Boeing shares the concerns raised on both sides of the Atlantic this week that government and regulatory agency reviews of the proposed EADS-BAE merger must include a rigorous examination of a full range of complex industrial and national security considerations,” the company said.

Oui ! Voir posts ci-dessus. Une Cie. à capitaux privés va effectivement scruter le comportement actionnarial d'un Gouvernement ! Pas mal comme "culture shock", n'est-ce pas ?

With Boeing and other US defence companies being seasoned lobbyists, there is bound to be plenty of scope for them to raise questions about whether Paris and Berlin should have any involvement in BAE’s US businesses, which range from sensitive defence electronics to armoured vehicles.

US lobbyists say they are engaged in a period of “shadow boxing” but that the real test for the deal will be when it is subject to scrutiny by the Committee on Foreign Investment in the United States (Cfius), which scrutinises the national security implications of foreign investments in US companies. “In the US, you can do as much lobbying as you want but until it goes through Cfius you can’t predict the outcome,” says one person close to the talks.

“We are not as far down the road with the Americans as we are with the Europeans,” an EADS source concedes.

“The Americans are crucial. The clear issue for them is that BAE Inc is a standalone biz. They just won’t stand for any hint of state interference.”

Indeed, the other fear is that the Americans will lean on the British to oppose the deal, though this has not yet happened.

This is the final part of the puzzle, but less important for now than the government questions. Mr Enders and Dick Olver, the BAE chairman, both recognise that they have a long way to go to convince shareholders of the financial merits of the deal, particularly on the crucial aspect of cost-savings and “synergies”. EADS shareholders are worried about diluting the Airbus growth story. And while Mr Enders insists the synergies are there, it is easy to understand why shareholders are sceptical when at the same time he is telling his government stakeholders that jobs will be protected.

Inside the British government one senior figure has remained conspicuously silent about the [Vous devez être inscrit et connecté pour voir ce lien]: business secretary Vince Cable.

Mr Cable and his business department have issued the most cautious of statements, saying that they would “properly protect” Britain’s public interest.

But the Liberal Democrat minister will be responsible for deciding whether the merger is subjected to the scrutiny of the UK competition authorities, if it wins government support.

So far the proposed deal has enjoyed a surprising degree of cross-party backing. Nick Clegg, Lib Dem leader, is said to be “hugely supportive” of a link which he hopes will create a European aerospace giant to rival Boeing.

Meanwhile, Liam Fox, the former Conservative defence secretary with close links to the US Republican party, also supported the deal. In an article for the Sunday Telegraph, he said the deal was good for BAE because it gave it access to the lucrative civil aviation market.

“For the UK to retain a national defence industry, BAE must diversify and expand into new markets,” he wrote. [Vous devez être inscrit et connecté pour voir ce lien] and is willing to promote the deal with Angela Merkel, German chancellor, François Hollande, French president, and US president Barack Obama.

However, while in opposition, Mr Cable was a frequent critic of BAE Systems amid allegations that the company routinely failed to report payments and commissions it made to facilitate defence transactions.

For now, officials at the business department believe that Mr Cable may only have to examine the deal if it is classified as a “merger”. If that is not the case – because of the complex structure of the transaction – then he would be able to avoid a decision, the officials suggest.

This appears to be wishful thinking, however. One competition lawyer told the FT that the barrier for the definition of “merger” was set low in the UK and therefore BAE-EADS would have to be considered by the government in such a light.

Mr Cable will have to decide if the deal raises public interest concerns, in which case he can instruct the Office of Fair Trading to investigate.

If not, the deal would revert to the competition directorate in Brussels – because the groups’ combined turnover crosses the EU threshold of €5bn.

If it did go to the OFT, Mr Cable would receive a report and then decide whether to clear the merger, refer it to the Competition Commission, or clear it in return for certain divestments or the ringfencing of strategic assets.

Sash Tusa, defence analyst at Echelon Research, said there were very few direct competition issues because there was virtually no overlap between the BAE and EADS in their UK businesses.

But he expected the British government to insist on various safeguards.

“I think there will have to be guarantees on almost everything, however, whether submarines, shipbuilding, military aircraft support or exports prime contracting, like Saudi Arabia,” he said. “You could see them being ringfenced, given these are key UK defence capabilities”.

Those close to the talks say that negotiations have already began as to which assets will be ringfenced.......

[Vous devez être inscrit et connecté pour voir ce lien], a [Vous devez être inscrit et connecté pour voir ce lien] shareholder, is unhappy about the valuation of the proposed aerospace and defence merger between the Franco-German group and [Vous devez être inscrit et connecté pour voir ce lien].

A person familiar with Daimler’s thinking told the Financial Times that [Vous devez être inscrit et connecté pour voir ce lien] underscored the German company’s concerns about valuation.

EADS shares have tumbled more than 12 per cent since [Vous devez être inscrit et connecté pour voir ce lien] was first revealed.

“It certainly hasn’t helped that the EADS share price tanked after the deal became public,” the person said. “Daimler shares the concerns of the capital market about the financial attractiveness of the transaction. Daimler also has a responsibility to its own shareholders.”

The source added, however, that valuation was one of several factors that Daimler would consider in evaluating the deal. Daimler declined to comment.

Daimler has a 15 per cent direct ownership stake in EADS and also manages the voting rights of a 7.5 per cent stake belonging to an investor consortium. The German company wants to reduce its EADS shareholding to focus on making cars and trucks and remains in talks with KFW, the German state development bank, about the sale of a 7.5 per stake.

However, the proposed deal may instead allow Daimler to sell those shares in the open market because the current EADS shareholder pact that balances French and German interests would then be dissolved.

...... Another big EADS shareholder told the FT last week that it had already sold EADS shares because it did not like the strategic rationale of diluting EADS’s commercial aerospace business with a defence business.

[Vous devez être inscrit et connecté pour voir ce lien] has warned it will walk away from its proposed €35bn tie-up with EADS if the deal waters down its [Vous devez être inscrit et connecté pour voir ce lien].

“[Vous devez être inscrit et connecté pour voir ce lien]if its Special Security Arrangement has to change to look more like that of [Vous devez être inscrit et connecté pour voir ce lien],” said one person close to BAE, in a sign of the complexities surrounding one of Europe’s largest and most sensitive industrial mergers in years.

This SSA, specifies that BAE’s senior leadership in the US is made up of Americans, among other things, and has allowed the UK’s biggest defence company to work on many lucrative US national security projects.

These include the $1,500bn [Vous devez être inscrit et connecté pour voir ce lien]to develop the most advanced radar-evading jet fighter.

EADS also has an SSA, but it is stricter than BAE’s and means it has to ringfence sensitive projects so they are run by an American-led proxy company that releases minimal financial information to the parent company and forbids day-to-day control.

BAE’s arrangement has allowed it to grow into the largest and most trusted foreign military supplier in the US, where it makes $14bn in revenue and employs 40,000 people in about 40 states.

That makes it attractive to Franco-German EADS, which has been l less successful supplier employing about 3,000 people in a US business with revenues of $1.4bn.

BAE’s insistence that it does not want to change its SSA could prove problematic.

Several lawyers close to the US approval process believe Washington will not allow BAE to keep its more generous SSA if it merges with EADS, in which both France and Germany have either a direct or indirect stake.

A major sticking point is the concern that France could maintain a share of the new unified company even if it gives up its day-to-day influence – a step envisioned by Tom Enders, EADS chief executive.

“The (US) military would rather have a BAE than a combined [Vous devez être inscrit et connecté pour voir ce lien]. BAE has been very successful in managing its US relationship. EADS is not in the same bucket, and a combined EADS-BAE is going to be treated a lot more like EADS than BAE,” says one lawyer who works on cases that go before the Committee on Foreign Investment in the United States (Cfius), which scrutinises the national security implications of foreign deals.

He believes the deal could pass US hurdles, but not without sacrifice on BAE’s part. “If they’re willing to submit to tighter controls than BAE had, they might be able to get a deal done.”

UK prime minister David Cameron has spoken to the French and German leaders about [Vous devez être inscrit et connecté pour voir ce lien] of [Vous devez être inscrit et connecté pour voir ce lien] and [Vous devez être inscrit et connecté pour voir ce lien]amid increasing signs of political concern over the defence deal in Berlin.

With the historic merger [Vous devez être inscrit et connecté pour voir ce lien], the German economic ministry has warned that any guarantee to protect jobs and plants in Germany would not be legally enforceable if breached. Job losses are one of the German government’s chief worries with the next national election coming in a year’s time.

The economics ministry also warned in a paper seen by the FT that the proposed 60:40 per cent merger ratio between EADS and BAE, respectively, was an “incorrect reflection” of the companies’ sizes and should “be closer to 70:30” instead.

The pace of diplomatic activity around the deal is speeding up with defence ministers from the three countries set to discuss it at an EU meeting in Cyprus this week.

Mr Cameron spoke to Angela Merkel, the German chancellor, on Friday night and to French President François Hollande on Monday morning to gauge the thinking in those two countries and to spell out the British position.

The approval of all three governments is needed for the deal, which will create a defence and aerospace group that rivals Boeing of the US. The British Government holds a “golden share” in defence contractors BAE while the French and German governments have stakes in EADS.

During his phone conversations Mr Cameron raised issues including the company’s governance, headquarters, national security issues and [Vous devez être inscrit et connecté pour voir ce lien].

The prime minister is attending the UN General Assembly on Tuesday and is expected to overlap in New York with President Barack Obama but the pair are “unlikely” to discuss BAE at this early stage.

Downing St is relaxed about the possibility of the companies demanding an extension of the October 10 bid deadline for the “complicated” talks.

Mr Cameron and his government are broadly positive about the merger, believing it has commercial logic.

However, a committee of MPs has launched an inquiry into the deal to assess its impact on Britain’s sovereign capabilities, export market and relationship with the US.

The Commons’ defence select committee will also examine consequences for trade and defence treaties and the implications for jobs and Britain’s industrial base.

Vince Cable, UK business secretary – who may get quasi-judicial oversight of the deal – on Monday told a meeting at [Vous devez être inscrit et connecté pour voir ce lien]in Brighton that he did not “worry about foreign ownership”. His aides said this did not imply he was backing the BAE/EADS combination.

The French government has so far avoided taking a public position on the merger, insisting that it is consulting both internally and with Berlin and London on the issue before making any decisions.

Paris is keeping open the option of holding on to an equity stake as well as the proposed “golden share” for each government. But one official said there appeared to be greater scepticism in Germany than in France over the merger mainly because of the greater threat it posed to jobs there.

At some point in the distant future [Vous devez être inscrit et connecté pour voir ce lien] will be a case study in the wonders of corporate governance. The owner of Airbus, which dukes it out with Boeing for the largest manufacturer of aircraft crown, has half its €21bn market capitalisation held by three shareholders that represent the national interests of France, Germany and Spain. Ideally, each would be a potential seller. In practice, their combined presence is a recipe for boardroom infighting and represents a stock overhang with large implications for EADS’s [Vous devez être inscrit et connecté pour voir ce lien] with [Vous devez être inscrit et connecté pour voir ce lien].

The 22.225 per cent stake – the precision matters – owned by France is held by the state holding company and the [Vous devez être inscrit et connecté pour voir ce lien] industrial group. Germany’s 22.225 per cent is held by [Vous devez être inscrit et connecté pour voir ce lien]. Spain’s SEPI owns just over 5 per cent. Those stakes would be diluted under the 60/40 split in favour of EADS outlined in the tentative merger terms, but even that leaves a big chunk of the new company owned by shareholders, some of whom want out, but under the control of governments that want to retain their influence.

EADS chief executive Tom Enders wants the merger to dismantle this tangle of interests. However, even if he succeeds – and he will surely not get everything he wants – the stock overhang will remain. Daimler, a particularly reluctant proxy for its government, had been in talks with the German state bank KFW about offloading a chunk of its stake; the merger is likely to increase its desire to quit. Lagardère, with 4.5 per cent, would be in a similar position.

EADS is a vessel for every possible hang-up the French and Germans have about Europe’s industrial and political prowess – and theirs. The merger’s architects must create a governance structure that does not merely reflect national interests but rises above them. With synergies thin on the ground, it is the least that shareholders deserve.

Tom Enders, chief executive of [Vous devez être inscrit et connecté pour voir ce lien], the Franco-German aerospace company, on Wednesday failed to make progress in persuading key members of the German parliament to [Vous devez être inscrit et connecté pour voir ce lien]with [Vous devez être inscrit et connecté pour voir ce lien], the UK defence group.

In a closed-door meeting he sought to reassure deputies that the merger would not [Vous devez être inscrit et connecté pour voir ce lien], while arguing forcefully for a future company structure that would be free from government interference in daily decision-making.

But parliamentarians who attended the 90-minute questioning at the Bundestag’s economics committee said the session left “more questions than answers” over the planned merger, after a government minister told them it was “not a question of how, but whether” the plan would go ahead.

“We want to create a company that is even more successful internationally and attracts investors,” Mr Enders said after the meeting. “There are lots of examples in this industry of companies that do not have to be influenced by politics.”

Hans-Joachim Otto, deputy economy minister, agreed that a merged company should be subject to less political influence than [Vous devez être inscrit et connecté pour voir ce lien], over which both French and German governments have intervened in decision-making. But he repeated that no final government decision had been taken on the deal.

Mr Enders faces opposition in Paris as well. French politicians have yet to be persuaded of the deal, especially given Mr Ender’s insistence that it must end the day-to-day influence Berlin and Paris have over EADS.

One powerful group within France’s industrial elite also appears to have started to lobby against the deal. Charles Edelstenne, chief executive of [Vous devez être inscrit et connecté pour voir ce lien], which produce’s France’s Rafale jet fighter, and Eric Trappier, a senior executive, this week met Pierre Moscovici, France’s economics minister.

Dassault is a competitor to EADS even though EADS owns 46 per cent of the French company. Earlier this year India chose Dassault’s Rafale jet fighter over the Eurofighter Typhoon, built by EADS, BAE and Italy’s [Vous devez être inscrit et connecté pour voir ce lien].

[Vous devez être inscrit et connecté pour voir ce lien] and EADS also compete in developing Europe’s next-generation unmanned, autonomous jet fighter (UAV). In that regard, Dassault pipped EADS at the post when the UK and France agreed to back the early development stage of a UAV designed by Dassault and BAE, leaving EADS fuming on the sidelines.

Dassault, which is 51 per cent owned by the influential Serge Dassault and his family, has lost some of its clout in Paris following Nicolas Sarkozy’s recent defeat in the presidential election. But analysts say it would be foolhardy to underestimate the company’s sway, especially given the high stakes involved in the deal and the questionable demand in the European defence market for more than one type of jet fighter or the production of several armed UAVs.

According to German reports, Berlin is insistent that France and Germany should maintain equal influence in the future company. Mr Enders said that if all the affected governments retained a “golden share”, as the UK government has in BAE Systems, it would give them equal influence.

But France is keen to keep its direct shareholding, while the German 22.5 per cent stake has hitherto been held by Daimler, the carmaker, and a consortium of public and private banks. Before the recent merger talks were revealed, Daimler had been in negotiations with the German government on reducing its shareholding.

In the meeting, Mr Enders defended the plan for the future entity to be divided between 60 per cent control for EADS and 40 per cent for BAE, although the German economics ministry has suggested that a 70-30 split would be more realistic.

He assured the parliamentarians that Germany would not lose jobs as a result of the merger, according to one. participant, who quoted him as saying: “What is in Germany will stay in Germany.”

However, in a reflection of the continuing political scepticism about the merger in Berlin, Kerstin Andreae, a deputy leader of the opposition Green party, said afterwards that “the national benefits of this merger have not been made apparent”.