PARIS EADS shareholder Lagardere told the aerospace group on Monday to review the "unsatisfactory" terms of its planned $45-billion (27.8 billion pounds) merger with BAE Systems, raising the pressure before a British regulatory deadline next week.
The French firm's demand marks another setback to the politically sensitive plan to create a European defence-and-aerospace giant before the October 10 deadline, and adds to concerns already expressed in Germany.
However, some market-watchers suggested Lagardere was simply seeking better conditions for a future sale of its minority stake in EADS, which makes Airbus jets, rather than fundamentally opposing the deal with the British group.
"Despite the industrial and strategic potential attributed to it, this plan has not yet demonstrated that it was creating value for EADS," Lagardere said in a statement.
Lagardere expressed dissatisfaction with the terms of the deal, under which EADS is currently due to get around 60 percent of the combined company.
"Lagardere considers that the merger conditions between EADS and BAE are currently unsatisfactory," it said. "Lagardere invites the executive management of EADS to proceed immediately with an indispensable review of the tie-up plan of EADS and BAE, taking better into account all the interests of the French reference shareholding in EADS."
Barring an extension, EADS and BAE have until Wednesday next week under UK takeover rules to set out detailed plans for the merger.
Lagardere holds 7.5 percent of EADS, half the French government's 15 percent, but is the senior partner on the French side of the Franco-German shareholder pact which underpins the group. Germany is represented by carmaker Daimler's 22.5 percent voting share.
A spokesman for EADS declined to comment on the Lagardere statement.
EADS and BAE Systems announced last month they were in talks to form what would be the world's biggest aerospace and defence group, marrying planemaker Airbus with Europe's largest defence contractor.
"I think they just want the right parity for exit," one London-based arbitrage trader said of Lagardere's statement. Lagardere shares were up 0.2 percent at 0744 GMT, while EADS and BAE were both trading around 0.6 percent higher.
Germany has deep reservations about the proposed merger, including doubts about whether the combined group would be safe from takeovers and could guarantee jobs, according to a ministry document seen by Reuters last week.
A person familiar with the matter also told Reuters previously that Daimler was unhappy about the proposed valuation of the deal.
German magazine Der Spiegel cited high-level civil servants on Sunday as saying that France and Germany had agreed that each should hold a 9 percent diluted stake in the merged entity, equivalent to a 15 percent undiluted stake in EADS.
The Franco-German agreement would form the basis for their negotiations with the British government in talks this week, the magazine added. A spokesman for German Economy Minister Philipp Roesler declined to confirm or deny the report.
French officials were not immediately available to comment on the Spiegel report, but sources familiar with the matter denied the two sides were in agreement on the shareholding or how their relative interests should be guaranteed.
French and German defence and foreign ministers were due to meet in Germany on Monday.
The bosses of both companies tried in a joint newspaper article published on Monday to reassure investors about the benefits of their planned merger amid what they described as "myths and misconceptions" over the project.
EADS shares have fallen 17 percent since September 12, when word of the negotiations was leaked. After shedding initial gains, BAE shares are back to where they were beforehand.
EADS Chief Executive Tom Enders and BAE head Ian King argued that the plan to join forces was born out of opportunity, not necessity, and that it would create growth, being better able to ride the cycles of civil aviation demand and defence spending.
EADS came out of a merger of French, German and Spanish interests in 2000 with a unique structure allowing the Paris government and Daimler to cohabit at arm's length.