An international dispute has broken out over BAE Systems’ attempt to sell its Germany-based Atlas Elektronik subsidiary to one of its European rivals, with the German bidders threatening a government veto of the deal if it is sold to Paris-based Thales.

People involved with the talks, which have reached their final stages, said on Tuesday that Thales’ bid was is “significantly” higher than that of a German bid led by steel group ThyssenKrupp.

According to one participant, ThyssenKrupp’s bid is about €50m ($59m) lower than Thales’, which is believed to be about €300m.

Despite the higher bid, however, ThyssenKrupp has told negotiators that it will not raise its offer, insisting that a Thales takeover will be vetoed by Berlin, which has become increasingly protectionist regarding its domestic defence companies. The stance has angered French and British negotiators, who have complained of a German stitch-up.

“Why would anyone get into the German defence market if they can’t get out by selling to the highest bidder?” said one person briefed on the talks.

Spokespeople from ThyssenKrupp and BAE declined to comment on the ongoing negotiations. Thales said it had has committed in its offer for Atlas to take on a German partner if it won, wins, adding that its preferred partner would be ThyssenKrupp itself.

BAE has narrowed the field to Thales and the ThyssenKrupp-led bid, which also includes Franco-German aerospace group EADS.

Most of EADS’ defence assets are in Germany. L-3 Communications, the fast-growing American defence group, was also a finalist, but has dropped out of the running.

The stalemate comes just days after German magazine Der Spiegel reported that a top defence official in the new government said the ministry would push for
a veto unless Atlas, a specialist in submarine electronics, was is sold to a German group.

Despite the ThyssenKrupp warning, BAE is believed to be leaning towards selling to Thales, because it has a fiduciary responsibility to sell to the highest bidder.

Get alerts on Aerospace & Defence when a new story is published

Copyright The Financial Times Limited 2018. All rights reserved.

Comments have not been enabled for this article.

Follow the topics in this article