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Ring-fencing claim in BAE deal move
BAE Systems' American defence arm will be ring-fenced if the merger with EADS goes ahead, it has been reported
Moves by BAE Systems and EADS to win approval for their £28 billion merger will include ring-fencing the American defence arm, it has been reported.
In an effort to preserve BAE's privileged relationship with the Pentagon, there will be just one British director - BAE's chief executive Ian King - and no French or German executives on the US board in order to maintain secrecy over defence contracts, The Sunday Times said.
The current special security agreement (SSA) dictates how BAE runs its American operations, allowing it to play a leading role in sensitive projects such as the F-35 Joint Strike Fighter.
As well as safeguarding the SSA, without which the merger will not go ahead, the newspaper said special powers giving the French and German governments the right to appoint members of the EADS board will also have to end.
BAE has said that the planned tie-up with Airbus owner EADS will form a "world-class" company in its sector, with combined sales of £60 billion and about 220,000 staff. The merged group would employ about 48,000 in the UK alone.
The deal, which will give BAE access to the lucrative civil aviation market, will leave BAE shareholders with 40% of the combined group.
The two companies have until October 10 to finalise terms but with the support of three European governments and America's defence department also required, it is likely that there will be an extension to the deadline.
Former defence secretary Dr Liam Fox said he believed that BAE could be "disadvantaged in the global marketplace" without a merger deal. He wrote in The Sunday Telegraph: "For the UK to retain a national defence industry BAE must diversify and expand into new markets."
Dr Fox's comments will carry weight because he is still a leading player in the Conservative Party and maintains close links to the Forces. He said his "instinctive preference" was for an American partner for BAE and warned that the biggest risk to the EADS deal was undue political influence from France and Germany.
Dr Fox added: "Without clear mechanisms to preclude foreign interference, the British Government should not support the proposals."
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