*

Airbus, Thales and Leonardo aim to pool their space

activities

into joint venture

*

Announcement could be as early as Wednesday, barring new

hitch

*

Talks focused on valuations, balance of power, anti-trust

(Narrows potential timing in paragraph 2, adds details from

paragraph 8)

By Tim Hepher and Giulia Segreti

PARIS/ROME, Oct 21 (Reuters) - The board of Italy's

Leonardo held 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,

people familiar with the matter said.

Barring a last-minute setback, the three companies are

expected to announce as early as Wednesday that they intend to

press ahead with plans to pool 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

an immediate sign-off and timing is not confirmed, 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.

EUROPEAN SPACE FIRMS FACE SPACEX CHALLENGE

Once seen as pioneers of commercial space, Europe's top

satellite firms - Airbus and a pair of ventures

controlled by Leonardo and France's Thales - 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 a joint venture - missile maker MBDA

in 2001.

Industry watchers said any announcement would be closely

scrutinised, particularly the extent to which the three parties

have agreed detailed governance arrangements including the roles

of chairperson, CEO and CFO - issues that have previously caused

friction in European aerospace mergers such as Airbus itself.

Leonardo is expected to face pressure to defend Italy's

interests in line with the nationalist agenda of Prime Minister

Georgia Meloni, who has sharply increased defence spending, as

France's Thales, whose CEO Patrice Caine is tacitly acknowledged

as the venture's effective leader, the people said.

France-based Airbus is widely seen as the most willing

of the three to reduce its exposure to space after crippling

losses in its space systems business and roughly 2,000 job cuts.