12:21 p.m. | Updated
LONDON – Shares of the European aerospace giants EADS and BAE Systems tumbled on Thursday as investors reacted negatively to the announced merger talks between the two companies.
A leading shareholder in EADS, which is the parent of Airbus, also said it would have to review the consequences of the potential merger before making a decision about the deal.
If completed, the deal would create an industry giant with a combined market value of almost $50 billion, annual revenue of more than $90 billion; it would employ around 220,000 people worldwide.
Shares in EADS fell 10.2 percent by the close of trading in Paris on Thursday, while stock in BAE Systems, which is listed in London, dropped 7.3 percent.
At a difficult time for the industry, the companies, Europe’s two largest aerospace firms, announced on Wednesday that they were in talks about a potential merger.
In the wake of the global economic slowdown, many countries are pulling back on military spending. Sales of passenger airlines have improved recently, but have remained sluggish during the recent financial market volatility.
Any merger would also have to navigate a minefield of regulatory approvals, including in the United States and Europe, before a deal could be completed.
Despite the potential cost savings from combining operations, some of EADS’ investors, which include the French and Spanish governments, reacted coolly to the discussions.
The French conglomerate Lagardère, which owns a 7.5 percent stake in EADS, said on Thursday that it had not decided whether to support the deal.
“The Lagardère group intends to ensure that all consequences associated with the proposed EADS-BAE Systems merger are taken into consideration in determining the terms and conditions of the proposed transaction before it consents to the deal,” it said in a statement.
Under British law, EADS and BAE Systems have until Oct. 10 to decide whether to pursue a merger.
Article source: http://dealbook.nytimes.com/2012/09/13/investors-wary-over-giant-aerospace-deal/?partner=rss&emc=rss