Invesco, which is BAE's largest shareholder with a 13% stake, said today that it was "appropriate to outline its significant reservations regarding both the proposal and its impact on long-term value for BAE shareholders."
In a critical statement, Invesco admitted it did not understand the "strategic logic" behind the proposed combination.
In particular, Invesco reckoned the merger would "materially jeopardise BAE's unique and privileged position in the United States defense market," and said it was concerned the level of state shareholding at a combined BAE/EADS would "result in governance arrangements driven more by political considerations than shareholder value creation."
Invesco claimed BAE could instead deliver "significant... upside value" for shareholders on a stand-alone basis, and that the proposed merger ratio "did not reflect BAE's superior cash generation, or the quality of its earnings stream, derived from the length and nature of its customer contracts."
Of particular interest to Neil Woodford, Invesco's legendary equity income investor, is that BAE's 5.9% dividend yield is more than double that of EADS's yield of 2.3%.
Indeed, Invesco said today that BAE's initial announcement "did not provide any visibility for dividends beyond 2013," and that it was "very concerned that shareholder dividends will not be prioritised in the combined group, with BAE shareholders then facing a significant drop in their dividend income."
According to Invesco's latest reports, Neil Woodford's Invesco Income and High Income portfolios own an aggregate 284 million BAE shares, which currently carry an £858 million market value and represent nearly 4% of Woodford's investment funds.
Invesco as a whole owns 432 million BAE shares on behalf of institutions and retail clients, and today described BAE as "a strong business with distinctive positions in the global defense market and good stand-alone prospects."
Certainly it seems Neil Woodford and Invesco Perpetual are keen on BAE -- albeit without EADS. So there may be a buying opportunity lurking here, especially if Invesco manages to derail the merger and BAE's shares drop lower.
Woodford, of course, has a sensational track record of picking winning FTSE shares that come backed with solid dividends. During the 15 years to 2011 for instance, his favorite large caps produced a 347% gain -- equivalent to more than eight times the return of the wider market.
You can learn more about Woodford's enormously successful dividend investing approach by reading this exclusive Motley Fool report. The report is full of valuable income insights and is free to download by clicking here.
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