Dasa, a unit of DaimlerChrysler AG which recently entered a joint venture with Spanish aerospace company CASA, declined comment on the report although it has often called Aerospatiale its natural partner.

The vast European defense and aerospace industry has long been moving toward consolidation to better compete with its transatlantic rivals like Boeing, which is the world's biggest aerospace group.

``It's baseless,'' an Aerospatiale spokesman said when asked about plans for an imminent merger with Dasa, as reported by German news magazine Der Spiegel.

Der Spiegel reported that the merger plans had already been presented to French President Jacques Chirac for his approval as the French government held just under 50 percent of Aerospatiale and had the right to veto any decision.

``We can take no position on that,'' a Dasa spokesman said.

A spokesman for Dasa parent DaimlerChrysler also declined to comment on speculation about specific deals.

``It is self explanatory that in the aerospace business everyone talks with each other. It is not only correct but also important,'' he said.

Earlier this year Dasa Chief Executive Manfred Bischoff was snubbed when the company's dreams of a British merger were shattered by news British Aerospace (BAe) was buying GEC's Marconi defense arm.

Dasa, which had hoped to tie up with BAe, declared it would pursue alternative alliances and Bischoff has repeatedly said that Aerospatiale would be the natural partner for Dasa, although the French government's stake could be an obstacle.

Dasa is already partners with Aerospatiale in the Airbus consortium, which also comprises BAe and CASA.

Bischoff said last month that the company was planning to float but gave no time frame.