Tom Enders, the chief executive of EADS (Other OTC: EADSF.PK - news) , has said merger talks with BAE Systems are in "good shape" and an announcement to the market providing more details will come "probably soon".
In a letter to EADS staff which marks Mr Enders first comments on the £30bn merger, he said EADS and BAE represent a "perfect fit" but warns there is “serious work to do” to convince shareholders and governments to back the deal.
Mr Enders confirms in the letter that EADS and BAE are focused on winning approval for the deal from governments, including the US, UK, France and Germany.
These talks are “constructive and advanced”, he adds, despite concerns about national security.
All the governments must voice their approval for the deal or it will face collapse. Britain's "golden share" in BAE means it can veto any merger or takeover of the company.
BAE is also understood to be demanding that Germany and France loosen their grip on EADS's strategy by losing their right to nominate board members and vote as a block.
"Governance and national security interests are currently the focus of our work," says Mr Enders.
"If we succeed and if the EADS shareholder pact can be dissolved, our governance will be significantly simplified and ‘normalised’.
"We are currently in constructive and advanced discussions with all relevant governments and are trying to accommodate their concerns and national security interests as best as possible within the framework of our envisioned transaction.
"Good governance is a key prerequisite for both companies, it’s the ‘go’ or ‘no go’ for this project!”
EADS employs 133,000 staff around the world, including more than 15,000 in the UK.
Mr Enders opens the letter by stating: “Firstly, I’d like to tell you that I’m pleased with our progress so far. Since the announcement, our discussions have continued to move forward with all stakeholders. I think we are in good shape to be able to provide further details to the market and our employees probably soon.
“Combining BAE Systems and EADS is a bold proposal, yes, but it is absolutely in line with Vision 2020, our long pursued strategy. In fact, it would enable us to reach our goals in one go seven years earlier than planned!”
“The strategic purpose of this combination is not size. The purpose is to lay the foundation for our long-term competitiveness in the rapidly changing landscape of the aerospace & defence industry.
"But why did we see the sharp drop of our share price after the leak announcement last week? I believe it is mainly due to the surprise and the fact that many of our investors focused rather on the Airbus (Paris: NL0000235190 - news) growth story than on our long-term Vision 2020 strategy.
“No doubt, we have some serious work to do and that goes particularly for our investor relations teams to convince shareholders and investors that we are on track to build a stronger growth platform with more resilient financials and better shareholder returns. But I’m convinced we have a very good and very attractive story to tell!”
Mr Enders says that despite initial criticism, the deal offers a chance to “actively shape” the defence industry for decades.
He writes: “I strongly believe this deal represents what is called a “perfect fit”: it doesn’t add complexity, it provides opportunity.
“Despite some initial critical reactions, word will soon go around, that this deal makes good business sense. I know that with combining businesses between EADS and BAE Systems (LSE: BA.L - news) , we can seize a unique opportunity an opportunity which will allow us to stay in the top league of our industry and to actively shape it in the decades to come.”