Report: BAE briefs Pentagon on merger deal with EADS

The meetings are focused on whether the company can retain its standing security deals with the department, which allow the British-based firm to do business with the Pentagon, once the merger goes through, according to Bloomberg. 

{mosads}If BAE can keep those agreements with DOD intact, the company would be firmly on track to secure approval for the deal from the Committee on Foreign Investment in the United States. CFIUS approval is a key benchmark to getting the merger done. 

However, some on the committee have raised concerns the merger would hand too much control of the defense and aerospace markets to foreign governments. 

France and Germany have direct and indirect stakes in EADS, the parent company of Airbus, and Britain has a stake in BAE.

“One of the big questions that will be asked in the U.S. is, ‘Does this transaction result in significantly greater foreign government control of the merged company?’ ” said Clay Lowery, a former assistant Treasury secretary who oversaw the CFIUS process under the administration of President George W. Bush, told Bloomberg on Friday. 

Aside from CFIUS, Germany is also raising concerns over the deal and threatening to block the entire merger over disputed government shares in EADS. 

German officials questioned the proposed 60-40 ratio to split control of the company, as they say EADS’s 60 percent share should be higher to reflect the proper size differential between the two, according to news reports. 

“More questions were left open than answered,” according to Kerstin Andreae, a member of the German parliament’s economic committee. 

“There are disagreements between the government and Tom Enders on the question of the valuation of the golden share,” referring to the government’s holdings in the companies.

On Thursday, EADS CEO Tom Enders told The Wall Street Journal he will not extend the Oct. 10 deadline to complete the merger, in the hopes the ultimatum will spur an agreement among the European powers opposing the deal.