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BAE, EADS $45 billion deal collapses

By the CNN Wire Staff
updated 3:16 AM EDT, Thu October 11, 2012
  • A $45 billion deal for EADS and BAE Systems to merge has collapsed
  • The deal had struggled against political and shareholder opposition to salvage plans
  • The deal was complicated by the desire of France and Germany to retain political influence

London (CNN) -- EADS and BAE Systems have dropped plans to merge after failing to win political support for a $45 billion deal that would have created a European aerospace and defense giant.

"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," the companies said in a statement Wednesday.

Read more detail: CNNMoney

France and Germany were keen to retain political influence in a merged company, a stance Britain believed would have put at risk BAE's privileged access to military contracts in the United States.

EADS, BAE complex merger canceled
EADS, BAE complex merger canceled

Barry Norris, founding partner of Argonaut Capital Partners, an investor in EADS, told CNN: "we think today's decision to terminate merger talks is actually a triumph for common sense and shareholder value." He added: "It's easy to forget that these are companies owned by their shareholders."

Watch: What went wrong?

A merger would have brought together the maker of Airbus planes with Europe's largest arms manufacturer and created a global rival to U.S. defense contractors such as Lockheed Martin, Northrop Grumman and Boeing.

Several British lawmakers, including Conservative Member of Parliament Ben Wallace, wrote to Prime Minister David Cameron earlier this month, raising concerns about the deal.

BAE and EADS believed that together they would be able to generate stronger growth by achieving a better revenue balance between civil aviation and defense, but that commercial rationale was challenged by some major investors.

"We are obviously disappointed that we were unable to reach an acceptable agreement with our various government stakeholders," BAE Systems Chief Executive Ian King said.

CNNMoney's Mark Thompson and CNN's Jim Boulden and Irene Chapple contributed to this report

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