Leonardo board meets as European satellite merger takes shape

By Giulia Segreti and Tim Hepher

ROME/PARIS, Oct 21 (Reuters) - The board of Italy's Leonardo LDOF.MI gathered for a crucial meeting on Tuesday to review a tentative deal to forge a new European satellite manufacturer with its existing partner Thales and rival Airbus AIR.PA, people familiar with the matter said.

Barring a late setback, the three companies could announce as early as this week that they have reached broad alignment on plans to pool their loss-making activities into a new venture to fend off competitors led by Elon Musk, two of the people said.

However, after more than a year of tricky talks over the balance of power, valuations, anti-trust issues and most recently a political crisis in France, there is no guarantee of a sign-off and the timing remains unconfirmed, they warned.

None of the companies agreed to comment.

Reuters reported on Monday that the three companies had agreed the framework of a deal, subject to board and regulatory approvals, with further detailed steps to be implemented later.

Once seen as pioneers of commercial space, Europe's top satellite firms - Airbus AIR.PA and a pair of ventures controlled by Leonardo and France's Thales TCFP.PA - have been dwarfed by tech rivals led by Musk's SpaceX and a deeper shift in the market towards cheap satellites in low Earth orbit.

The talks mark the latest attempt to tie together fragmented European assets and draw inspiration from a decision by France, Italy and Britain to set up the missile maker MBDA in 2001.