EADS-BAE Pull Plug on Merger

Government resistance blocks effort to create world's largest aerospace company.

European Aeronautic, Defence & Space Co. and BAE Systems Plc abandoned their planned merger amid government resistance, leaving in tatters their aspiration to create the world’s largest aerospace and defense company.

“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,” BAE said in a statement today, as a deadline neared with no accord in sight.

Six Months

EADS and BAE spent more than six months putting together the merger plan. Initial talks between Enders and his counterpart at BAE, Ian King, focused on how to more effectively structure the Eurofighter joint venture after their Typhoon bid lost a multi-billion dollar competition in India to the Dassault Aviation SA Rafale.

Balancing Act

Combining EADS and BAE would have allowed EADS to balance out its Airbus SAS civil aviation business with more defense assets, while BAE would have gained access to the civil business at a time when governments are slashing defense budgets. EADS would have also enlarged its U.S. defense business, which has made few inroads into the Department on Defense, while BAE is the Pentagon’s fourth-largest contractor.

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