Defence Merger Under Pressure From Investors

BAE Systems and EADS battle to save their proposed multi-billion pound merger as major shareholders join governments in questioning the deal's terms.

Media tycoon Arnaud Lagardere - whose company owns a 7.5% stake in Airbus manufacturer EADS - demanded better terms for French controlling shareholders.

He called on management to complete "without delay, the indispensable re-examination of the project to combine EADS and BAE, to better take into account the interest of all the French controlling shareholders of EADS".

The company's chief executive Tom Enders is believed to have held talks with the billionaire in an attempt to salvage the deal.

Germany's automotive company Daimler - which owns 22.5% of EADS - is also thought to want a review of the merger's terms.

The opposition followed attempts by the bosses of both businesses to reassure worried investors the combined company would be more than the sum of its parts.

The merger - if it goes ahead - would create the world's biggest aerospace firm with a market value of around £40bn, which would be better able to compete with the US' Boeing.

But the deal requires the approval of the British, German and French governments.

The US is also taking a close interest because of BAE's involvement in some sensitive defence projects.

The British company, which works mostly in the defence, security and military sectors, employs around 34,800 employees in the UK.

While France's EADS employs nearly 15,000 people in Britain including at its Airbus wing sites in Filton, near Bristol, and in Broughton, North Wales.

Unions are concerned that a merger would trigger thousands of job cuts, and the British government is expected to block the deal if French and German governments were to take stake worth more than 9% in the new company.

Speaking at the Royal Academy of Engineering in London on Monday, Mr Enders said: "It's absolutely not surprising that some shareholders are concerned about the benefits and their returns".

But he warned the merger talks need to go-ahead because of the uncertainty for workers and investors.

"We cannot go on for much longer," he added.

A deadline of October 10 has been set by the Takeover Panel for the companies to agree on the merger's terms.