UPDATE 12:54 p.m. EDT: The UK Ministry of Defence said there may be an annoucement Tuesday night or Wednesday by the two companies regarding progress on the merger talks, Bloomberg reported, citing an unnamed ministry representative.

A $45 billion deal that would merge European Aeronautic, Defence & Space Co. (EPA: EAD) and BAE Systems PLC (LON: BA) to create the No. 1 aerospace and defense company seems on its way to breaking the Wednesday deadline to convince Germany to get on board.

The UK and France have worked out some key differences in the wording of the deal, according to wire service reports. The CEOs of both companies were mulling whether to request an extension of the deadline to conclude negotiations.

An EADS-BAE merger would create a behemoth that would generate $90 billion a year in revenue from commercial aviation and defense contracting, but the structure of EADS, based in Toulouse, France, requires the backing of European governments before EADS CEO Tom Enders and BAE CEO Ian King can take their proposal to private investors.

The company would become the principal rival to Boeing Co. (NYSE: BA), of Chicago, the No. 1 U.S. aircraft maker, which reported 2011 revenue of $68.7 billion. It would also challenge No. 1 defense contractor Lockheed Martin (NYSE: LMT), of Bethesda, Md., whose 2011 revenue was $46.5 billion.

At least one major BAE shareholder has expressed concern the merger would harm London-based BAE’s current ideal position in acquiring U.S. defense contracts.

EADS manufactures civilian aircraft under the Airbus brand and produced the Eurofighter jet. BAE is largely a defense-oriented company, making air, land and sea military vehicles; it also produces components used in the manufacture of Airbus commercial planes.  

After the UK and France reportedly ironed out their differences regarding the deal, Germany has yet to agree to its terms as it seeks assurances that key operations would stay in Germany, according to Bloomberg.

Germany, already carrying much of the load in the euro zone sovereign debt crisis, is concerned about losing jobs and influence. The government would retain the option of holding 9 percent of the new company.

Germany's Daimler AG (FRA: DAI) is also a major EADS stakeholder. France would see its share of EADS decline to 9 percent, from 15 percent.

British Defense Secretary Philip Hammond was scheduled to discuss the merger with his French and German counterparts in Brussels on Tuesday. He also said he would speak with U.S. Defense Secretary Leon Panetta to gauge how the U.S. would view the merger with regard to BAE’s defense deals with the U.S. government, according to Bloomberg.

Meanwhile, Invesco Perpetual Select Trust Plc (LON:IVPU), a London-based global investor that owns 13.3 percent of BAE, told The Wall Street Journal it had “significant reservations” about the merger that it says would harm BAE’s “privileged position in the U.S. defense market.”

With all of the complexities involved, speculation abounds that merger proponents will need to extend their efforts past the Oct. 10 deadline.

BAE is a subcontractor in the F-35 Joint Strike Fighter manufactured by Lockheed Martin.

BAE Systems shares fell 0.46 percent to £324.80 ($520.16) on Tuesday. EADS was down 0.19 percent to €26.20.