New warning over BAE deal

Defence and European and International Affairs Philip Hammond during the first day of the Conservative Party Conference
Defence and European and International Affairs Philip Hammond during the first day of the Conservative Party Conference
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FRANCE and Germany must reduce their stakes in European aerospace giant EADS if the Government is to allow a proposed merger with BAE Systems to go ahead, Defence Secretary Philip Hammond has warned.

It comes as Preston North and Wyre MP Ben Wallace flew to meet US defence chiefs to discuss the deal which could see the two firms merge by Wednesday.

Mr Wallace led a group of 45 Conservatives which wrote to Prime Minister David Cameron urging him to use Britain’s “golden share” if the French and German governments insist on taking stakes in any new company.

And Mr Hammond said it was a “red line” issue for the UK that the governments in Paris and Berlin gave up their ability to control the company. He said the British Government was prepared to use its “golden share” in BAE - Britain’s biggest defence contractor - to veto a deal unless its conditions were met.

The minister added: “We have made very clear we do have red lines around the BAE-EADS merger and that if they can’t be satisfied, then we will use our special share to veto the deal.

“It is not, I think, necessary to have no French or German interest in the company.

“It is necessary to reduce that stake below the level at which it can control or direct the way the company acts. We want to see this company - and I think the management wants 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.”

Mr Wallace said he wanted to test the waters in Washington amid fears a merger could jeopardise the flagship F-35 fighter jet deal, which secures thousands of jobs at BAE’s site at Samlesbury, near Preston.

He added: “BAE Systems has a relationship with the United States which we must do everything to safeguard, not least because it is of such great significant to its workforce in Lancashire.” BAE and EADS announced merger talks last month to create the world’s biggest aerospace and defence company with combined sales of £60bn and a market value of around £28bn.

In the UK, they would employ around 52,000 staff, including at BAE’s factories at Warton and Samlesbury.

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