“If I wasn’t a born optimist, I would not have started this project.” So declared Tom Enders earlier this week, in a letter to employees marking his 100th day as EADS chief executive.
Only now has it become clear just how optimistic Enders was being.
Enders the optimist tried to achieve in one month what his predecessors had failed to do in the previous 12 years – resolve the political tensions at the heart of EADS once and for all through a merger with BAE Systems.
He even convinced BAE Systems that he could achieve this. However, even for an optimist, it proved impossible
Enders saw a merger with BAE as a means of facilitating the end of France and Germany’s grasp on EADS.
Ever since EADS was formed in 2000 the company has been dogged by rows between Germany and France.
The governments have disputed the location of the company’s headquarters, the sites for manufacturing, the nationality of the chief executive, and the future of stakes held by French media group Lagardere and German car maker Daimler that both companies would ideally like to sell.
“Significant progress has been made culturally and, in terms of management structures, with the removal of the co-chairman and co-CEO roles.
"It has allowed EADS to operate as a broader European entity rather than a collection of individual businesses. But the political pressure has always been there in the background,” said Roger Johnston, defence analyst at Edison.
EADS and BAE planned that, in the enlarged company, France and Germany’s 22.5pc shareholdings would turn into a golden share, their right to appoint board members would vanish, and their ability to vote together as a controlling concert party would be blocked.
Securing the backing of France and Germany for this plan – as well as the pivotal support of Britain and the US – was always going to be difficult.
But Enders told BAE he could deliver the support of Angela Merkel and Francois Hollande, and BAE set about winning British backing.
After BAE entered merger talks it became clear the three European governments were split three ways.
Germany and Britain wanted less state involvement in EADS, France did not. France and Britain were happy for the end of Franco-German parity in share ownership, Germany was not. France and Germany could agree on retaining parity through buying more shares, Britain could not.
However, Enders, Ian King, his counterpart at BAE, and their advisers, still believed this could be resolved.
Cameron and Hollande both supported the concept of the merger and showed a willingness to offer concessions to achieve it.
During talks at a Nato conference in Brussels this week, the two countries even agreed a compromise. Philip Hammond, the British Defence Secretary, agreed that France and Germany could each maintain their proposed 9pc shareholdings in the enlarged company and potentially buy more shares, as long as the combined holding of the two countries did not rise much further, amid claims that they had proposed taking it as high as 27pc.
However, by the time this agreement was reached on Tuesday, it was already clear to Britain and France that the deal could be in serious trouble because of Germany’s stance.
A conference call last Friday between Bernard Gray for the British government, Emmanuel Macron for France, and Lars-Hendrik Röller for Germany sparked the downfall of the deal.
The call lasted just 20 minutes after Mr Roller told Britain and France that Germany was unhappy with their proposed compromise agreement and demanded that the headquarters of the new company was in Munich.
The hardened stance from Germany left the countries perplexed.
However, all became clearer on Tuesday when an adviser in Merkel’s office called the offices of Hollande and Cameron.
Merkel, the adviser said, was fundamentally against EADS merging with a defence company and would not support the BAE deal.
Even for an optimist like Enders, there was no way back from this.
Merkel is understood to have reservations about investing in the defence industry, similar to her opposition to nuclear power, and was also concerned about the prospect of job losses in Germany.
The German Chancellor’s stance shocked Enders – who is now left with a company seemingly more influenced by politicians than ever.
But it shocked BAE even more, who had been promised by Enders the optimist that he would win the support of Merkel.
A banker to BAE said: “Look, we thought it was different. We knew governments would have questions but Merkel’s finite refusal has come as a surprise. It is not one issue – she didn’t like that transaction full stop.”
Another senior defence source said: “BAE are holding Tom to account for this.”
Source: Telegraph
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