London: A proposed tie-up between British arms maker BAE Systems and European aerospace giant EADS has raised major concern in Britain on fears that it would put a key strategic company in foreign control.

The vast $45 billion (Dh165 billion) deal — which must be finalised by October 10 under takeover law — has also sparked worries over Britain’s political relationship with the United States, from where BAE wins almost half of its business.

German Chancellor Angela Merkel and French President Francois Hollande met in Germany on Saturday but did not reach a decision while pledging to meet the deadline.

BAE Systems and the European Aeronautic Defence and Space Company (EADS) revealed this month that they were in talks to form a global aerospace and defence leader that would compete more effectively against US rival Boeing.

Crucially, however, the proposed transaction would give BAE 40 per cent of the proposed enlarged group and EADS the majority 60 per cent stake.

That has sparked accusations from some quarters — including Conservative lawmaker Ben Wallace — that the so-called “combination” deal was effectively a takeover of BAE.

“My view of the merger is this: as it stands, it is a takeover, 40 per cent BAE and 60 per cent EADS,” Wallace told AFP.

“There are of course advantages to the merger — insofar as market and scale — but we in the UK do not like state shares in our businesses. Nor does the chief executive officer of EADS, Tom Enders.”

Under the plan being discussed, the newly merged group will issue special golden shares to each of the French, German and British governments, to replace their current ownership structures.

Britain has a special share in BAE but does not get involved in the day-to-day running of the business.

Wallace, whose constituency in northwestern England includes BAE’s Warton factory in Lancashire, argued that the government needed assurances that the combined group would be left to operate free of any political interference.

“The UK should only give the go-ahead if France and Germany divest itself of their stakes and leave the company to compete fairly around the world.

“Not to do so would risk political interference and also problems with US competitors.

“We know state interference has caused problems with EADS and Airbus in the past and it is that type of meddling that has prevented EADS becoming the world leader it could be,” added Wallace.

A good fit

BAE and EADS are regarded by industry analysts as a good fit because BAE is an expert in defence and security — making military transporters, Challenger tanks, Tornado jet fighters and aircraft carriers — whereas most of EADS’s work is in the commercial sector.

The European giant is regarded an industrial champion in Germany, Spain and especially France, where the Airbus passenger jet is still hailed as a national icon despite its multinational pedigree.

In the United States, BAE is a key supplier for the F-35 Joint Strike Fighter jet and is also responsible for the Trident nuclear submarine programme.

Meanwhile Alan West, ex-head of Britain’s Royal Navy, warned that London’s relationship with Washington could be damaged if BAE became the junior partner.

“I have concerns about American exchange of information with us,” West told The Times newspaper.

“We are joined at the hips with the Americans on nuclear submarines. I just cannot see the Americans being happy about it.”

BAE Systems is the largest foreign supplier to the Pentagon and the British government is eager to maintain this status.

However, this could now change, according to experts.

“It just might be a problem,” said Richard Aboulafia, vice-president of analysis at US-based aerospace and defence consultancy Teal Group Corporation.

“They claim the current security agreements will remain in place, but I am not sure a Franco-German company will be allowed to own a unit like BAE’s defence electronics business.

“They may need to divest this unit if they cannot persuade the US government that firewalls will keep this technology separated.”

Aboulafia added that the new BAE-EADS would have less freedom as more nations sought to safeguard what they deemed as “strategic” assets.

“A company needs to have the freedom to rationalise operations, and to share technology between business units,” he told AFP.

BAE is also part of the Eurofighter Typhoon consortium that includes the German and Spanish subsidiaries of EADS, as well as Italy’s Finmeccanica.