BAE and EADS soothe US fears over £28bn merger

A ring-fenced US defence company will be formed to soothe security fears at the Pentagon if the £28bn merger of BAE Systems and EADS goes ahead, it emerged yesterday.

Defence contractor BAE's special security arrangement with the US, which allowed it to take a prominent role in projects such as the F-35 Joint Strike Fighter, will be preserved with a new company, whose board will be filled with US nationals, reports suggested.

The assurance to the Pentagon comes after fears that French and German executives from Airbus maker EADS could access details of US defence contracts. As investors, the right of the French and German governments to appoint board members would also be scrapped. BAE declined to comment but sources said the company had a "long history of ringfencing complex and sensitive projects".