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Aerospace talks set to overshoot deadline

Friday, September 28, 2012    

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NICOSIA, Cyprus — Talks on a contentious tie-up between aerospace groups EADS and BAE Systems look set to overshoot a deadline, with a German minister and another source saying more time is needed.

"I think we need more time," Defence Minister Thomas de Maiziere told journalists in Nicosia.

He was speaking after meeting his British and French counterparts on Wednesday to discuss the proposed deal, which would create a giant to rival the US group Boeing.

A source close to the talks told AFP that it looked as though British arms manufacturer BAE Systems and the European Aeronautic Defence and Space Company would ask Britain's stock market regulator to extend its October 10 deadline.

Under British takeover rules, the two companies have until October 10 formally to announce that they intend to combine their activities or ditch the project, though they could also ask for a delay.

The British side did not think that seeking a delay would be a problem, the source added.

Both sides apparently want to avoid a delay, however. An EADS spokesman told AFP: "Our intention is still to provide the necessary clarifications by October 10."

But de Maiziere stressed that the proposed deal "is a complex situation. There are a lot of questions and conditions".

While highlighting "constructive discussions" between the three countries' defence chiefs, the German added: "Nothing has been decided yet.

"The ministers of defence are responsible only for one very difficult and important aspect but there are other aspects", notably, shareholders interests.

France and Germany each hold significant stakes in EADS's capital.

"We will be in close contact," de Maiziere noted.

The German minister spoke after talks with British Defence Secretary Philip Hammond and French Defence Minister Jean Yves le Drian on the sidelines of a broader defence ministers meeting in the Cypriot capital.

An advisor to le Drian also spoke of "dense and constructive" discussions.

Meanwhile, De Maiziere declined to comment on the thorny question of how much each group would own in a combined entity.

The economy and finance ministries were also involved in the negotiations, and this aspect of the tie-up "is not on my table", he said.

According to a German economy ministry report, Berlin has reservations over the fact that EADS, the parent company of Airbus, would hold only 60 per cent of the new group under the proposed US$45-billion ($4 trillion) deal, and that veto rights of participating countries would be limited.

The ministry also said that there had been inadequate guarantees on keeping company plants open, potentially threatening jobs.

EADS has operations in France, Germany and Spain.

On Wednesday, EADS chief executive Tom Enders addressed German lawmakers in Berlin regarding the mooted deal, but people involved said he had not yet won them over.

"The federal government has kept open whether it wants to give its approval here or not," said Kerstin Andreae, deputy chairwoman of the Green party's parliamentary group.

"From what we hear, it's not just a question of 'how' on the merger but also very basically 'whether'," she said.

The government's aeronautics sector coordinator Peter Hintze said later: "The position of the government on the question of the merger is still completely open."

In late afternoon trading yesterday, shares in EADS were up 1.06 per cent in a Paris market rising 0.36 per cent, while BAE stocks were up 1.38 per cent in a flat market in London.

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