Any Thales merger with EADS would need German backing

The Financial Times Deutschland says EADS, which owns 80% of commercial plane maker Airbus, is looking to acquire the 20% stake that BAE owns.

It follows speculation EADS is also poised to take over French defence electronics firm Thales.

Germany may oppose any EADS-Thales tie-up, as it would diminish German influence within EADS.

If an EADS-Thales merger went ahead it would create a firm with sales larger than US rival Boeing, and consolidate the European defence industry.

However retaining the national balance within EADS, where German and French factions share power, would be critical to gaining German backing for any merger.

EADS is also reported to be interested in BAE's stake in the four-nation Eurofighter combat jet consortium, and its guided missile and military electronics operations, the newspaper said.

EADS and BAE have not commented on the report.