Doubt cast over BAE and Airbus merger
DOUBT has been cast on a multi-billion-pound merger going ahead which would see two of Bristol's biggest firms joining forces.
As reported in the Post, defence firm BAE Systems has been talking to Airbus parent company EADS about a £30 billion merger.
An estimated 5,000 people work for both firms in the Bristol area and thousands more work in companies which are involved in the aerospace industry.
The merger would create one of the largest and most powerful aviation companies in the world but has not been welcomed in every quarter.
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The highly complex arrangements both companies have with governments across the world mean that negotiations were always going to be difficult.
But BAE Systems yesterday warned it would walk away from the deal if it threatened its contracts in America with the US Defence Department.
And it also emerged there will be an inquiry into the deal. The Parliamentary inquiry will focus on whether the merger will affect jobs in the UK as well as the country's defence capabilities.
A spokesperson for the defence select committee said: "The merger of two such large defence contractors would have a significant and strategic impact on their relationships with UK, US and European governments. It could also radically alter the defence industrial base in these countries."
MPs will be taking evidence on the possible merger in October and November before delivering a verdict.
It is highly unusual for Parliament to carry out a review of a proposed takeover of a stock market-listed business but the Government has a direct stake in BAE Systems.
Meanwhile, it has emerged Prime Minister David Cameron has been speaking to his French and German counterparts about the deal. A spokesman for Downing Street said: "Given the nature of the companies' activities, the Government will clearly have some involvement and we need to ensure that the UK's public interest is properly protected.
"We are working with the companies to ensure that that is the case. We are also talking to people in other countries about this.
"The Prime Minister spoke to Chancellor (Angela) Merkel on Friday night and has spoken to President (Francois) Hollande this morning.
"Clearly, the companies have activities in all three countries and you would expect us to stay in close contact on it. We have an interest in ensuring that the UK's interests are properly protected and we will do that."
Mr Cameron has not yet discussed the matter with US President Barack Obama but is expected to in the near future.
There has been speculation that the US could oppose the deal. Mr Obama has vetoed similar deals in the past and has a reputation for protecting American interests.
BAE has said the planned tie-up with Airbus owner EADS would form a "world-class" company, with combined sales of £60 billion and about 220,000 staff. The merged group would employ about 48,000 in the UK alone.
The deal, which would give BAE access to the lucrative civil aviation market, would leave BAE shareholders with 40 per cent of the combined group.
The two companies have until October 10 to finalise terms under takeover panel rules, but there was speculation that they may request an extension to the deadline following the announcement about the House of Commons inquiry.
Mr Cameron's official spokesman declined to give details of the PM's discussions with his French and German opposite numbers when he addressed reporters at a press briefing in Westminster.