EADS-BAE tie-up by French government

European aerospace groups EADS and Britain's BAE Systems are facing obstacles in their proposed tie-up from the French government, the German economic daily Handelsblatt reported in its edition to appear Monday. The newspaper, citing a source in the French president's cabinet, said the obstacles included the fact that France "does not want in any case to give up part" of its stake in the European Aeronautic Defence and Space Company. The governments of Germany and France each have a hand in 22.35-percent stakes in EADS, which unites space and defence interests alongside Airbus airliners The privately held BAE Systems has stated as a condition of the tie-up, presented as a merger, that the two governments withdraw their stakes in the new entity. When contacted by AFP, the Elysee presidential office Sunday evening declined to comment on the report. The German newspaper also said, citing an unnamed top official in the French government, that Paris would remain however "fundamentally open" to the proposed tie-up but would rather be prepared to reduce its participation in the new company, though no lower than a nine percent stake. For the German government, the main objective is "balance within the new organisational structure" of the group which would be formed by the merger, Handelsblatt said. According to British market rules for mergers, the two companies have until October 10 to conclude their negotiations or abandon the tie-up. They can also ask for a time extension, but both sides have so far rejected that option as they want to quickly reach a deal. The proposed tie-up announced by the two groups on September 12 would change the landscape of the global aerospace industry, creating a broadly based competitor to US groups, notably Boeing, with the ability to develop a big presence in the North American market. The European firms say that EADS and BAE Systems, which has big interests in defence industries, would be worth together about $45 billion (34.6 billion euros).