Citing two sources familiar with the talks, Bloomberg reports the French and U.K. governments have agreed to the merger and Germany, which holds influence in EADS along with France, is holding out.
The two firms face a Wednesday deadline of 5 p.m. London time to either make a formal merger announcement, seek an extension of the 28-day negotiating window under U.K. takeover law, or stop negotiations, according to the Wall Street Journal.
The U.K. has veto power over a takeover of BAE while France holds a 22.5 percent stake in EADS — 15 percent through government ownership and 7.5 percent held by publishing company Lagardere SCA.
According to Bloomberg, Germany holds no government stake in EADS but wields influence through Daimler AG’s 22.5 percent stake in the aerospace and defense firm.
The Journal reports much of the talks have centered around state ownership in a combined firm with the German government wanting equal ownership with France.
If the merger goes through, EADS shareholders would own 60 percent and BAE shareholders would own 40 percent in a combined firm, which would be dual-listed in London and Amsterdam.