EADS, BAE Merger Doubts
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It could lead to the biggest shake-up in Europe's aerospace and defence sector in over a decade. EADS, parent company of plane maker Airbus, is in advanced talks with Britain's defence firm BAE

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It could lead to the biggest shake-up in Europe's aerospace and defence sector in over a decade. EADS, parent company of plane maker Airbus, is in advanced talks with Britain's defence firm BAE Systems. They're looking to announce an industry giant with commercial and military operations, which would have more sales than their U.S. rival Boeing. The proposed merger would allow the firms to lower costs and make it easier for them to deal with defence budget cuts on both sides of the Atlantic. Ed Salvesen is an equity analyst at Brewer Dolphin. SOUNDBITE: Ed Salvesen, Equity Analyst, Brewer Dolphin, saying (English): "It completely changes the landscape for European defence and European aerospace in many ways. EADS was previously just a kind of majority civil aerospace company and this has changed its landscape and its core exposures." The complex deal would be the biggest since EADS was created in 2000 under joint French and German control. But there's no guarantee it will go through. Several sources have said U.S. government officials are unlikely to block the merger - but it would throw up many regulatory obstacles. SOUNDBITE: Ed Salvesen, Equity Analyst, Brewer Dolphin, saying (English): "It will be a battlefield ahead for this. First of all EADS and BAE systems both have government shares, government ownerships. So when we look it EADS is owned by Germany and France, and a small share by Spain. This means that they have to agree to the deal firstly. The second one is BAE Systems is owned by the UK government. It only has a one pound equivalent golden share agreement, but there are specific programmes that would have to be ring-fenced for this deal to go through." Concerns about how long the deal could take to go through - or if it will even be approved - seems to have rattled investors. EADS' stock tumbled as much 11%, with BAE's down more than 7%. Michael Ingram from BGC Partners says the deal makes sense for BAE, as defence spending is reduced. SOUNDBITE: Michael Ingram, Market Commentator, BGC Partners, saying (English): "EADS has rather more, shall we say, intangible, you know strategic reasons for wanting to gain exposure to the U.S. via BAE and reinforce its position in defence. So yeah I think there are going to be issues at the shareholder level and it looks to me as though the shareholders at EADS are likely to be the people making the most noise." In any case, analysts believe the announcement from EADS and BAE will launch a round of consolidation in the sector, where huge companies compete globally. Joanna Partridge, Reuters