BAE says EADS merger terminated

Defence giant BAE Systems has officially announced the merger between it and aerospace firm EADS is off.

"Discussions with the relevant governments had not reached a point where both companies could fully disclose the benefits and detailed business case for this merger," the firm said.

But the companies continued to fight their corner, saying the £28bn deal had made sense.

Ian King, Chief Executive of BAE Systems, today said the firm was "obviously disappointed that we were unable to reach an acceptable agreement with our various government stakeholders".

"We believe the merger presented a unique opportunity for BAE Systems and EADS to combine two world class and complementary businesses to create a world leading aerospace, defence and security group," he said.

Tom Enders, Chief Executive of EADS, said he was "glad" they had attempted the deal, adding "I'm sure there will be other challenges we'll tackle together in the future".

The two firms had until 5pm (4pm GMT) on Wednesday to announce the terms of the merger or ask for more time to finalise their plans, under rules set down by the UK's City Takeover Panel.

The main obstacle to a deal seemed to have been disagreement over the level of government ownership for the UK, France and Germany.

There were reports that German Chancellor Angela Merkel was against the deal and that her government had demanded the joint firm be headquartered in Munich.

UK Defence Secretary Philip Hammond had said that France and Germany must reduce their stakes in EADS if the UK was to allow the merger to go ahead.

However, Invesco, the largest shareholder in BAE, had also voiced "significant reservations" over the tie up and the impact it could have on shareholders.