"We have 28 days to complete the operation" in order to meet London stock exchange regulations, a close associate of EADS chief executive Tom Enders told AFP, expressing confidence that the deal would be reached as high level talks are "on the right path".
But last shares in the companies plummeted, with the stock price of EADS, the maker of the Airbus plane, down by more than 10% and weapons maker BAE Systems losing more than 7%.
EADS and BAE have until October 10 to seal the takeover and create what would be the world's biggest aerospace company in what is potentially a major shake-up in a fast changing industry.
"Together, we will create a company spanning the world in aerospace, defence and security," Enders said in memo sent to employees and AFP.
While Enders insisted talks were ongoing, the letter hailed the tie-up as "good news" for both employees and shareholders and insisted the company would end up "clearly stronger".
But a person close to the negotiations said the timetable to close the deal was "untenable".
"Whatever the case, we must move quickly" because the more time passes, the more likely another player could get into the mix, the source said.
"The two groups are in agreement on the overall philosophy of the deal," the source added.
The remaining hurdles now are political.
EADS is an industrial champion in Germany, Spain and especially France, where the Airbus passenger jet is still hailed as a national icon despite its multinational pedigree. Britain holds a preferential stake in BAE.
Under the plan, the two groups would issue special golden shares in BAE Systems and EADS to each of the French, German and British governments.
The talks then envisage BAE Systems owning 40% of the enlarged group, with EADS holding 60%.
The source close to Tom Enders added that executive boards would be staffed with European members.
In Paris, officials were mum on government strategy in the blockbuster deal, while German government sources sent mixed signals, doing little to assuage market jitters.
"It is questionable whether the proposed structure can actually be agreed to," news agency DPA said citing government sources that spoke of "serious reservations".
"Alongside questions of European law, there is also the question as to the value of such an arrangement," DPA cited the source as saying.
But a separate source told AFP that Berlin was in "constructive talks" with EADS and also envisaged "close consultation with the French government".
Lagardere, the French conglomerate that owns 7.5% of EADS and whose head Arnaud Lagardere is EADS chairman, said it would decide on the merger proposal once "all the conditions" were settled.
Despite Fitch and Moody's rating agencies saying an eventual deal would have a positive impact on the debt ratings for the groups, investors continued to shun their shares.
"Markets have a short term vision," aerospace consultant Philippe Plouvier of Roland Berger said.
For Plouvier, the deal would be a "perfect stroke" for EADS.
"EADS could not hope for better as it had three clear objectives: reshape its business portfolio, enter the US and reinforce its defence electronics business since its Cassidian system is suffering on an international level."
The deal would bring "huge growth potential" to the European airspace industry, Plouvier said, and offer BAE, whose defence electronics systems are sector leaders, a much needed impetus after a long series of poor earnings.
Plouvier said he saw little chance of regulators in either Brussels or the US blocking the deal as few of the businesses involved overlapped and the merger would bring more competition to the US defence industry.
Late Wednesday, Boeing chief Jim McNerney said his company saw no threat from a proposed merger of European firms EADS and BAE Systems.
"I have a pretty deep and abiding faith in our company's strength so I don't see this as something that is going to threaten us fundamentally," he said.
Source: AFP via I-Net Bridge.
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