European Aeronautic, Defence & Space Co. and BAE Systems Plc are reviving a decade-old plan to build an equal to Boeing Co. that would balance civil and defense operations in an era of shrinking military budgets.

EADS stock slumped as much as 10 percent in Paris, while BAE declined as much as 9.2 percent in London on concern that a combined company will struggle to achieve savings and penetrate the U.S. defense market. EADS, the parent of Airbus SAS, would control 60 percent of the new entity, with London-based BAE owning the rest, the companies said yesterday.

"This will be a very complex organization and there is a risk of synergies coming only much later," said Yan Derocles, an analyst at Oddo Securities in Paris. "Airbus is a big growth story and will be heavily diluted in the new company. And there's also the problem of significant constraints on the defense business in the U.S."