BAE/EADS multi billion deal on point of collapse - according to reports

THE £28 billion merger between defence giants BAE Systems and EADS appears to be on the point of collapse, according to widespread reports.

The two firms, who between them employ around 6,000 in the Bristol area, have been locked in talks for months with the aim of creating the biggest aerospace company in the world.

But with a takeover panel decision due later today and French and German governments refusing to budge on a series of demands the deal appears to be falling apart.

According to reports the Germans in particular want to maintain control over the new company - a position that would not be acceptable to major customers such as the Department of Defense in the US.

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Conservative MPS and major shareholders in the firm have also publicly expressed concerns about the deal in recent days.

The unions have also claimed that the merger would lead to hundreds of job cuts at Airbus factories in the UK. However, Filton is not thought to be under threat because the bulk of the work in Bristol is around the research and development of new aircraft.

Under the current City Takeover Panel rules, BAE and Airbus parent EADS have until 5pm today to announce the terms of the merger or ask for an extension to finalise their plans.

EADS chief executive Tom Enders and Ian King, his counterpart at BAE, have both called on the various parties to support the merger.

But the two men must decide if enough progress has been made in talks over government shareholdings to pave the way for a possible deal.

The merger would create a huge firm with combined sales of £60 billion and more than 220,000 staff, with around 52,000 employees in the UK alone.

France has a direct stake in EADS while German influence is held through a 22 per cent stake owned by car maker and industrial group Daimler.

German premier Angela Merkel is said to be opposed to the deal and there are also rumours that the Germans are insisting the headquarters of the new firm is in their company.

UK politicians have voiced concerns over the level of Franco-German ownership when the UK would have no direct stake.

Defence Secretary Philip Hammond warned it was a "red line" issue for the UK that France and Germany reduced their stakes, stressing that the Government was prepared to use its so-called golden share in BAE to veto a deal unless its conditions were met.

Britain is also concerned that significant state ownership could jeopardise BAE's US business, with America seen as being against Paris or Berlin having too much influence in the company's operations.

Another sticking point is the 7.5 per cent stake held in EADS by French media group Lagardere, which said it wanted to sell its stake before the merger plans were announced last month.

BAE's biggest shareholder, Invesco Perpetual, which owns more than 13 per cent of the group, said it does not understand the strategic logic of the merger and is worried it will threaten BAE's "unique and privileged position" in the US defence market.