BAE-EADS merger called off due to political deadlock

European defense giants BAE Systems and EADS have called it quits on their planned merger as a result of snags encountered in high-level political talks involving the governments of the United Kingdom, France and Germany, BBC reported Oct. 10.

The decision to part ways followed days of tense discussions, the story said. For its part, the United Kingdom wanted its European counterparts to agree to limit their influence in the merged firm as a way to enable BAE to continue its strong business with the U.S. Defense Department.

The real obstacle, however, may have been Germany's intransigent opposition to the deal, the story said. In the face of such opposition, the two companies were left with no recourse other than to call off their merger plans, business experts said in the story.

"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," said the two companies in a memo, part of which was published on Slate.

The two companies were facing a key deadline on Oct. 11 in which they would have needed to decide whether to proceed with the merger, ask for more time to continue talks or call it off, reports the Associated Press.

Although France is the only government that owns a direct stake in either of the two companies, Germany has for a long time held considerable influence in EADS through shares held by auto manufacturer Daimler and also private and public banks, the Associated Press said. Germany wanted a part in the new company to maintain that traditional role, the story said.

Germany's position became problematic because the United Kingdom and the companies' executives were wary about distributing too many shares to European governments, the story said.

About the Author

William Welsh is a freelance writer covering IT and defense technology.

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