BAE Systems in merger talks with EADS "Further to the recent movement in BAE Systems' share price, BAE Systems and EADS confirm that they are in discussions regarding a possible combination of their businesses," the pair said in a joint statement, adding that the talks envisaged BAE Systems owning 40pc of the enlarged group, with EADS holding a majority 60pc stake. "The potential combination would create a world class international aerospace, defence and security group with substantial centres of manufacturing and technology excellence in France, Germany, Spain, the UK and the US," it added. Under the proposals being discussed, the two groups would issue special golden shares in BAE Systems and EADS to each of the French, German and British governments. This would replace Britain's stake in BAE Systems and the stakeholder arrangement in EADS, the pair said. In addition, it has been agreed that EADS would pay £200m to its shareholders prior to completion of a possible transaction. A Government spokesman said: "We are aware of this proposal. The business benefits of any such arrangements are a matter for the companies involved. However, given the nature of the companies' activities we would of course want to ensure that the UK's public interest was properly protected. We are working with the companies to ensure that this is the case. Given the market sensitive nature of transactions of this sort we would not want to comment further at this stage. BAE shares jumped 11pc, topping the FTSE 100 leaderboard, with the blue chip index down 0.3pc. EADS shares in Paris were 2pc lower, Reuters reported.