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Shares fall after Airbus owner reveals merger talks

Reuters/Gonzalo Fuentes

Shares in the European aerospace company EADS, which owns Airbus and is part owned by the French government, fell sharply after it revealed merger plans with the British arms maker BAE Systems.

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EADS stocks plunged almost nine percent to 25.50 euros in Paris opening trade on Thursday after losing more than five percent shortly following the announcement on Wednesday.

In London, BAE Systems fell six and a half percent to 340 pence, reversing gains made a day earlier.

In a joint statement, the two firms say the merger will “create a world class international aerospace, defence and security group with substantial centres of manufacturing and technology excellence in France, Germany, Spain, the UK and the USA.”

The enlarged group could rival the US giant Boeing.

The talks envisage BAE Systems owning 40 percent of the merged group, with EADS owning 60 percent.

Under the plan, the two groups would issue special golden shares to the French, German and British governments to replace these countries’ stakes in the two companies.

Both groups say they have held talks with a "range" of governments around the world over the proposed deal.

This includes the German and French governments.

EADS would pay 250 million euros to its shareholders prior to completing the transaction.

Financial analysts have expressed doubts that the merger could go ahead.

The bank Citigroup downgraded its "buy" rating on EADS on Thursday to "neutral", saying: "We believe that achieving merger synergies for the combined entity could be difficult, particularly given the need to ring-fence certain strategically sensitive activities.”

 

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