British multinational arms company, BAE, and the European Aeronautic Defence and Space Company (EADS) are to create an industry giant, aiming to leave their US rival Boeing behind in sales.
According to a proposed deal which is in advanced talks, special shares would be issued to the governments of France, Germany, and the UK.
The companies' merger would give BAE and EADS shareholders 40 percent and 60 percent of a joint group respectively.
A tie-up between the two companies is assumed to lower the costs and boost the variety of products, ranging from Airbus commercial jets and military transport planes to the BAE-made Euro-fighter Typhoon jets and Astute-class nuclear-powered submarines.
While tensions rised between Germany and France over the group's activities near the Airbus headquarters in Toulouse, the deal could allow EADS to break free from its dictated agreement to maintain a Franco-German balance of power.
For the deal to go ahead, the two companies need to get over numerous regulatory, cultural and security hurdles.
Analysts and trade unions have raised concerns over the proposed £29.8 billion merger of BAE and EADS and noted that the deal's success will lead the country to serious job cuts.
Britain’s largest union, Unite, called for an urgent meeting with Defence Secretary, Philip Hammond, and Business secretary, Vince Cable, over the current issues.