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Defense firms quit blockbuster merger talks

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By The Los Angeles Times
Wednesday, Oct. 10, 2012, 6:46 p.m.

LOS ANGELES ­— One month after announcing they were in blockbuster merger talks, Airbus parent European Aeronautic Defense & Space Co. and BAE Systems PLC decided to terminate their discussions as a result of a political impasse.

The combination of the two European aerospace/defense giants would have established the largest such company in the world.

Together, British-owned BAE and EADS, owned in part by the French, German and Spanish governments, would have annual sales totaling more than $94 billion, dwarfing industry leader Boeing Co.'s $68.7 billion.

But in a joint statement, the companies said: “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 potential merger would have had broad effects across the defense industry, particularly for larger contractors such as Lockheed Martin Corp., Northrop Grumman Corp. and Boeing.

BAE and EADS have divisions in the United States and frequently compete for defense work here. Both firms have suppliers and facilities in Southern California.

Analysts had said that the deal made the most sense on the defense side of business, now that global defense revenues are on the decline.

EADS and BAE have a history of collaboration and work together as partners on a number of projects, including MBDA, a European company that develops and manufactures missiles, and the Eurofighter Typhoon, a modern combat aircraft used by various European militaries.

“We are obviously disappointed that we were unable to reach an acceptable agreement with our various government stakeholders,” Ian King, chief executive of BAE Systems, said in a statement. “We believe the merger presented a unique opportunity.”

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