British defence giant BAE Systems is poised to fall into French and German hands in a £31billion deal.
In a late announcement yesterday, it was disclosed that talks between BAE and European Aeronautic, Defence & Space (EADS) are at an advanced stage.
BAE claimed the proposed deal would be a merger, but it would see its shareholders own 40 per cent of the combined group and EADS 60 per cent.
A consortium of aerospace and defence manufacturers from France, Germany and Spain, EADS is headquartered in Paris and Berlin.
BAE is Britain’s biggest defence contractor and exporter and has been formed over decades by a series of mergers among the nation’s most revered defence names, such as Vickers, DeHavilland and Marconi.
The prospect of BAE becoming a minority partner in a European-wide defence venture is likely to alarm Tory Eurosceptics who may see the deal as placing Britain’s defence future in the hands of Paris and Berlin.
Uncertainty also exists over whether some of the 40,000 UK jobs and technology could end up being moved to France or Germany.
The UK government, which has the power to veto such a deal in the interests of national security, last night said it would work to ensure ‘public interest’ was protected.
BAE said the tie-up would form a ‘world class’ firm, with combined sales of £60billion and 220,000 staff, including 48,000 in the UK.