Why EADS, BAE Deal cave

it does not really matter if German or French-or English-fitting blamed in part for the failed merger negotiation between the European Aeronautics Defence & Space Co. (EADSY) and the British BAE Systems (BAESY). main fault lies with the fact that the three capitals test politicians dictate how a large company is owned and run. In the past few weeks, Berlin, Paris, and London had argued over everything from the location of corporate headquarters for the amount of work the new company will remain within their borders. Although BAE and EADS wants to tieup, was canceled on October 10 because "the government stakeholder interests can not be reconciled enough," the company said in a statement. Government requires not only deep-sixed the merger, they also set the effort to bring together the old European defense industry to help compete with U.S. giants such as Boeing (BA). "Very myopic," said Michel Merluzeau, aviation consultant G2 Solutions in Kirkland, Washington, Bloomberg News. "How can one plan for EU defense integration with extras such as territorial mindset?" Future prospects for both companies, notably BAE Systems, may also be injured. BAE has worked hard to develop the defense business in the U.S., now its largest market. But the plan of merger underlines the fact that it is smaller than U.S. rivals, said analyst Robert Stallard of RBC Capital Markets in London. The merger will create the largest aerospace groups in the world, continue the Boeing.EADS, for the part, is eager to build a defense business to reduce dependence on sales of civilian aircraft by Airbus subsidiary. Bae, who have access to the U.S. market, it seems very appropriate. Stallard called the collapse of the merger "a dark day for the defense of Europe ... which is still relatively fragmented and budget resources are significantly lower compared to the U.S. "Government leaders wasted no time in defending their conversation management. French President Fran├žois Hollande said both companies made their own choice to cancel the merger and the government has done enough to protect the work of the French nation and "the interests of the defense." German Deputy Economy Minister Peter Hintze Der Spiegel that "the interests of German industry protected" by maintaining EADS in its current form as a Franco-German company.Even if the merger is sealed, the government demanded concessions weaken the joint team . France, for example, is demanded to maintain at least 9 per cent stake in the group and it was suggested that the Germans have similar interests. That could jeopardize BAE business with the Pentagon, because of U.S. restrictions on technology sharing secrets with foreign companies. That Invesco, the UK fund management component which is the largest shareholder BAE, mentioned risks, speaking out against the merger. BAE now operates the business through a subsidiary of the U.S. defense apart. "For a company as a joint company to be successful, it is necessary to operate as a commercial enterprise to be free from control or undue influence of any single government," British Defense Secretary Philip Hammond told BBC News after talking merger cave officer. European does not rule the possibility of return to the table. Joachim Pfeiffer, a spokesman for German Chancellor Angela Merkel CDU party, said on October 10 that the new negotiations between EADS and BAE and EADS are still options can also search for a merger partner in Italy. However, the conversation should involve governments of France and Germany, which directly or indirectly hold a significant stake in EADS. "That's not the consent of the government to kill this deal brings the lessons," said Guy Anderson, an analyst at IHS Jane's Defence in London, said in an e-mail note. "Meshing the interests of investors and governments and take ownership of the state, private, and as state-owned companies will prove to be a Herculean task."

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