UK threatens veto of defense merger

“We want to see this company prospering as a commercial business,” said  UK Defense Secretary Philip Hammond.
afp/getty images
“We want to see this company prospering as a commercial business,” said UK Defense Secretary Philip Hammond.

LONDON — The French and German governments must reduce their stakes in the defense company EADS for the United Kingdom to allow a proposed merger with BAE Systems to go ahead, Britain’s defense secretary warned on Sunday.

Philip Hammond said that Britain would veto the mega-merger of the aeronautics and defense companies if this requirement is not satisfied.

‘‘It is not, I think, necessary to have no French or German government interest in the company,’’ Hammond told the BBC in an interview. ‘‘It is necessary to reduce that stake below the level at which it can control or direct the way the company acts.’’


The deal would create a global aerospace and defense company with combined sales of more than $90.3 billion and more than 220,000 employees.

Get Talking Points in your inbox:
An afternoon recap of the day’s most important business news, delivered weekdays.
Thank you for signing up! Sign up for more newsletters here

BAE Systems has operations at several New England locations, including Lexington and Tewksbury in Massachusetts and Nashua and Manchester in New Hampshire.

‘‘We want to see this company prospering as a commercial business focused on doing the things that are right for the business, not being beholden to or controlled by any one government,’’ Hammond added.

EADS, the parent of aircraft maker Airbus, is jointly French and German owned, though it is incorporated in the Netherlands.

The French government owns 15 percent and French media company Lagardere has 7.5 percent.


Germany’s government does not have direct stakes in EADS, but has influence through auto maker Daimler, which holds a 22.5 percent stake.

The companies have until Wednesday to say whether they want to continue with the talks.

On Friday, 45 British lawmakers wrote to Prime Minister David Cameron, warning that the proposed merger would hand control of much of the British defense industry to a company that would not safeguard the country’s interests.

EADS, one of Europe’s biggest companies, is also the parent of helicopter maker Eurocopter, satellite builder Astrium, and defense electronics contractor Cassidian.

The proposed merger is fraught with difficulties, not least because France and Germany have been fighting for an equal say in EADS.