BAE ready to quit deal if US ties at risk BAE Systems has warned it will walk away from its proposed €35bn tie-up with EADS if the deal waters down its special relationship with the Pentagon. "BAE will not do this deal if its Special Security Arrangement has to change to look more like that of EADS," said one person close to BAE, in a sign of the complexities surrounding one of Europe's largest and most sensitive industrial mergers in years. This SSA, specifies that BAE's senior leadership in the US is made up of Americans, among other things, and has allowed the UK's biggest defence company to work on many lucrative US national security projects. These include the $1,500bn F-35 joint strike fighter programme to develop the most advanced radar-evading jet fighter. EADS also has an SSA, but it is stricter than BAE's and means it has to ringfence sensitive projects so they are run by an American-led proxy company that releases minimal financial information to the parent company and forbids day-to-day control. BAE's arrangement has allowed it to grow into the largest and most trusted foreign military supplier in the US, where it makes $14bn in revenue and employs 40,000 people in about 40 states. That makes it attractive to Franco-German EADS, which has been a less successful supplier employing about 3,000 people in a US business with revenues of $1.4bn. BAE's insistence that it does not want to change its SSA could prove problematic. Several lawyers close to the US approval process believe Washington will not allow BAE to keep its more generous SSA if it merges with EADS, in which both France and Germany have either a direct or indirect stake. A major sticking point is the concern that France could maintain a share of the new unified company even if it gives up its day-to-day influence - a step envisioned by Tom Enders, EADS chief executive. The [US] military would rather have a BAE than a combined BAE-EADS. BAE has been very successful in managing its US relationship. EADS is not in the same bucket, and a combined EADS-BAE is going to be treated a lot more like EADS than BAE," says one lawyer who works on cases that go before the Committee on Foreign Investment in the United States (Cfius), which scrutinises the national security implications of foreign deals. He believes the deal could pass US hurdles, but not without sacrifice on BAE's part. If they're willing to submit to tighter controls than BAE had, they might be able to get a deal done. Under the planned merger, EADS, the owner of Airbus, would end up controlling 60 per cent of a new global aerospace and defence group big enough to rival Boeing of the US, while BAE would have 40 per cent. The deal is still being examined by the three governments most closely involved in the UK, Germany and France. Both Berlin and Paris have either a direct or indirect stake in EADS, while the UK has a so-called "golden share" in BAE that means it can block a deal on national security grounds. UK prime minister, David Cameron, is broadly supportive of a deal he thinks can benefit the British economy. Angela Merkel, German chancellor, and François Hollande, France's president, discussed the proposed merger at a meeting in Ludwigsburg, southern Germany, on Saturday, but did not reach any decisive conclusions. Mr Hollande said both governments were seeking conditions covering "jobs, industrial strategy, defence activities, and our respective national interests." Officials expect discussions to intensify among the three governments in the coming days.