Disappointment in Bristol as BAE and EADS merger plan fails

A MULTI-MILLION-POUND merger between two of Bristol's biggest companies has collapsed with unions in the city accusing the German government of scuppering the deal.

BAE Systems and EADS parent firm Airbus, who between them employ around 5,000 staff in the Bristol area, have been holding talks about a £28 billion merger for several months.

But yesterday, after weeks of speculation, the two firms released a joint statement announcing the deal had been called off. The decision came in the wake of a series of stumbling blocks including objections from MPs, rows between governments and concerns raised by investors.

Unions had also raised fears about the prospect of job losses in the UK if the merger went ahead. However, staff at Filton were disappointed that the move has fallen through.

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Union spokesman Mike Byefield said: "The deal probably would not have meant that much to Filton as we are a standalone operation.

"It might have affected the company in other parts of the country but we were broadly in favour of it because it would have made both EADS and Airbus stronger companies.

"It seems a real shame and a lost opportunity that the German government decided to scupper the deal."

BAE will still press ahead with the sale of Filton Airfield which is due to close at the end of the year.

The deal would have created a defence and aviation company with combined sales of £60 billion and more than 220,000 staff, with around 52,000 employees in the UK.

BAE said it had become clear that the interests of government stakeholders – including France and Germany – could not be reconciled with each other or with the company's objectives.

BAE chief executive Ian King said the British business remained "strong and financially robust".

He added: "We are obviously disappointed that we were unable to reach an acceptable agreement with our various government stakeholders."

It is believed Germany dealt the final blow to the troubled deal, with reports suggesting that German Chancellor Angela Merkel opposed the merger.

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.

EADS chief executive Tom Enders said it was a "pity" the companies did not succeed but added: "I'm glad we tried".

Unite urged the UK Government to strengthen its "golden share" in BAE Systems by taking an active stake in the company to safeguard British jobs and boost British manufacturing.

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: "The highly skilled workforces of both companies are the beating heart of British manufacturing. A merger, with a jobs guarantee, would have created a strong new company that could have protected the UK's long-term interests.

"There was an industrial logic to the merger, but national and political interests proved to be the stumbling block. The UK Government now needs to strengthen its golden share and send a powerful message that it backs British manufacturing and BAE Systems.

"Short-termism cannot be allowed to govern BAE's future. BAE management in the past has made some crucial wrong decisions, such as selling its stake in Airbus in 2006.

"BAE is a great British company. The Government needs to follow the example of Germany and France where they pursue an active industrial policy and adopt an approach that safeguards the highly skilled jobs which are critical to our country's defence."

As well as the political wrangling, major shareholders have also put the deal under pressure.

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

Defence Secretary Philip Hammond said the proposed merger collapsed because it was "too difficult" to reconcile the differences of the governments involved.

He said BAE now faced "challenges" and warned it must "evolve".