LONDON, Sept 23 Britain's BAE Systems and
Europe's EADS have told the Pentagon they will create a
ring-fenced U.S. defence firm with a board of U.S. nationals to
win approval for their proposed 28 billion pound ($45 billion)
merger, the Sunday Times newspaper said.
The American arm will have just one British director - BAE's
chief executive Ian King - while no French or German executives
will be given seats, or be able to see details of U.S.
contracts, the paper said, without citing sources.
Earlier this month British defence company BAE and European
aerospace giant EADS announced that they were in early talks to
create a global giant to compete with the likes of Boeing and
Lockheed Martin, but the two companies face growing political
obstacles to the deal.
France, which has a 15 percent stake in EADS, and Germany,
which has no direct stake, pledged on Saturday to consult
closely on the deal but announced no joint decisions.
The offer to create a ring-fenced U.S. company is aimed at
preserving BAE's privileged relationship with the Pentagon,
which is governed by a unique contract, the special security
agreement (SSA), the Sunday Times said.
Senior sources at BAE told the newspaper that the merger
will not go ahead unless the SSA is preserved.
On Monday U.S. Air Force Secretary Michael Donley said the
U.S. Defense Department needed more details to be able to assess
the security implications of the proposed tie-up.
Some European analysts have said the deal would have
negative U.S. security implications, suggesting that U.S.
officials could order BAE to divest some business units that do
sensitive work for the U.S. military or intelligence agencies.
But sources close to the matter have said there is little
overlap in the U.S. work of BAE and EADS, and both firms already
have existing security deals that prevent their foreign-based
parent companies from influencing their work on sensitive U.S.
BAE declined to comment. EADS could not immediately be
reached for comment.