DaimlerChrysler, a major shareholder in the European Aeronautic Defence and Space Company, ruled out Friday the idea of a possible merger between EADS and the French defence technology group Thales as favoured by France.

DaimlerChrysler holds around a third of EADS, as does the French group Lagardere and the French state. The remainder is traded on the stock exchange.

Paris has been pushing for a possible merger between EADS and Thales. And one of EADS's incoming chairman, Frenchman Noel Forgeard, has also expressed support for such a move.

But there have been strong objections in Germany to a merger of EADS and Thales, because it would give France a bigger weighting in the shareholder structure of a merged group.

And DaimlerChrysler, which effectively represents German interests in the group, is seen as playing a key role in the matter.

In an interview published in the Financial Times Deutschland on Friday, DaimlerChrysler chief Juergen Schrempp rejected the idea of a fully-fledged merger.

"There are some areas where EADS and Thales could cooperate. But I don't see any point in a merger, either from a shareholder's point of view or from a strategic viewpoint," Schrempp said.

The German-US auto maker also intended to hold on to its stake in EADS, even if aerospace is no longer regarded as a core area of business for DaimlerChrysler, Schrempp said.

"If I look at EADS from a shareholder's point view, I see no reason for us to separate. EADS is creating value for this company," he said.

In Paris, EADS shares were up 0.25 percent at 23.83 euros and Thales was off 0.64 percent at 34.03 euros in morning trade, while the CAC 40 was 0.22 percent higher at 4,070.12 points.

CA Cheuvreux analysts said they still expected changes to occur in the Thales shareholding structure.

"There are a lot of political angles in this story and this does not change our view that Thales's shareholding structure will evolve one way or the other. Any weakness can be used as an opportunity," they said.

A Paris-based analyst, however, said speculation about an imminent merger seemed to have faded, noting attention should focus on Thales's fundamentals *1 now with the company scheduled to release full-year results next week.

With acknowledgement to Sapa.

*1 Like occasionally doing an honest deal.