EADS to offer Germany concessions for BAE deal - paper

FRANKFURT (Reuters) - Franco-German aerospace and defence group EADS is prepared to offer Germany a veto right and job guarantees in a bid to gain political approval for a merger with Britain's BAE Systems, Financial Times Germany said on Sunday, citing industry sources.

EADS (EAD.PA) and BAE (BAES.L) are lobbying various governments in order to merge and form the world's biggest aerospace and defence company.

A spokesman for EADS on Sunday declined to comment.

France currently has a form of veto in the shape of an option to buy back certain assets related to its M-51 nuclear deterrent.

Under the merger deal put forward by both companies, European governments whose strategic interests are involved would be granted a special share.

The share would allows Britain, France and Germany to block any attempt by a shareholder they deemed undesirable to vote with more than 15 percent of the stock in the event of a proposed takeover, people familiar with the matter said.

EADS has already drawn up plans for such a voting ceiling over the past year as it flirted with the idea of replacing the current system of block voting among strategic shareholders with a more normal capital structure. But the plans only saw the light of day during the current merger talks with BAE Systems.

EADS is currently controlled by a Franco-German pact between two sets of shareholders controlling 22.5 percent each: the French government with 15 percent and media firm Lagardere (LAGA.PA) on one side and German carmaker Daimler AG (DAIGn.DE) on the other.

Under the merger proposal, the shareholder pact would lapse, but each member would be free to keep its pro rata stake or sell as they wished.

The stakes of the French government and Daimler would fall to 9 percent each and could remain intact for some time as EADS takes 60 percent of the combined aerospace and defence group, sources familiar with the matter said.

The newspaper said the new corporate governance structure would also call for a majority of the European Union citizens on the board.

Separately, BAE Systems is prepared to ring-fence projects such as the Trident nuclear submarine program to calm growing fears over the impact on security and employment of its planned merger with EADS.

The two companies face political obstacles to the proposed 30 billion pound deal, which is being driven largely by the need of U.S. and European defence firms to offset the impact of shrinking national military budgets.

(Reporting by Edward Taylor, Tim Hepher; editing by Gary Crosse)