London-traded BAE Systems (BA.) and the Euronext-traded EADS (EAD) have decided to end their merger talks.
The companies jointly announced an end to the talks on Wednesday, citing difficulties with government stakeholders.
Ian King, chief executive of BAE Systems, said, "We are obviously disappointed that we were unable to reach an acceptable agreement with our various government stakeholders."
In a press release, the companies stated:
"BAE Systems and EADS believe that the merger was based on sound industrial logic. It represented a unique opportunity to create a combination from two strong and successful companies greater than the sum of the parts.
"From the outset of discussions between the parties, both BAE Systems and EADS were clear that they would proceed with a merger of their businesses only if a transaction structure could be created that aligned the interests of the parties' stakeholders and received their support ... Notwithstanding a great deal of constructive and professional engagement with the respective governments over recent weeks, it has become clear that the interests of the parties' government stakeholders cannot be adequately reconciled with each other or with the objectives that BAE Systems and EADS established for the merger. BAE Systems and EADS have therefore decided it is in the best interests of their companies and shareholders to terminate the discussions."
Morningstar analyst Neal Dihora was sceptical about the would-be merger, saying: "potential synergies around a deal are difficult to quantify ... It appears that political forces were too great, at least during the current period, leading to an end to discussions."
BAE and EADS announced that they were in talks about a potential merger in mid-September.