Darling demands mega-merger stake

Former chancellor Alistair Darling has heaped further pressure on the proposed mega-merger between defence giants BAE Systems and EADS as he said Britain should demand to retain a stake in the combined company.

Mr Darling told the Financial Times that Britain's interests would be damaged if French and German governments, which are current EADS shareholders, sought stakes while the UK did not.

He said the logic, to create a new European rival to compete with Boeing in America, was understandable but that all three governments should have share interests.

"We will be taken to the cleaners," he told the FT. "I don't see how you could have a large new company like this with the French and German governments having large direct and indirect stakes and we have none."

He added: "I would prefer that all three governments had minimal stakes. There is a danger that decisions in the defence and the commercial businesses could be taken on the basis of politics rather than what is best."

BAE and EADS face a number of hurdles if the deal is to go through, with France and Germany said to be keen to keep significant equity stakes in the merged group. It is thought Germany is insisting on taking a 9% stake to match France's holding, which some believe could scupper the deal.

Britain holds a "golden share" in BAE, meaning it can veto deals that are seen to put the public interest at risk, but is not thought to have made any demands for a direct equity holding in the enlarged company.

EADS chief executive Tom Enders - understood to be a long-term critic of EADS's state shareholdings - reportedly said he would consider guaranteeing jobs as he seeks to win Germany's support for the deal without it insisting on a stake. He told German newspaper Bild: "I am so convinced about our project that I am ready to talk about attractive job and site guarantees, which I could not consider for EADS."

BAE and EADS announced merger talks last month to create the world's biggest aerospace and defence company with combined sales of £60 billion and a market value of around £28 billion. In the UK, they would employ around 52,000 staff.

But the two groups face mounting issues to see the deal through, with some major shareholders also unhappy with the deal.