BAE Systems and EADS terminate merger talks

BAE Systems' proposed merger with EADS has collapsed following intense political and shareholder pressure.

Major shareholders, led by Invesco Perpetual's Neil Woodford (pictured), voiced their objections to the planned £30 billion deal, while the French, German and British governments jostled for influence over the proposed combined entity.

BAE Systems continues to believe the merger was based on sound industrial logic, arguing it represented a unique opportunity to create a combination from two strong and successful companies far greater than the sum of their parts.

However, political pressure from the three governments forced the duo to abort the plan.

'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,' it was announced in a statement to the market.  

Earlier this week Woodford wrote a detailed letter to BAE outlining why he thought the merger was a bad idea. However, BAE maintains the merger would have represented a good deal for Woodford and other investors and believes it could have eventually proved this to doubting shareholders.

In a second statement BAE chief executive Ian King said: 'We are obviously disappointed that we were unable to reach an acceptable agreement with our various government stakeholders.

'We believe the merger presented a unique opportunity for BAE Systems and EADS to combine two world class and complementary businesses to create a world leading aerospace, defence and security group.'

He continued: 'However, our business remains strong and financially robust. We continue to see opportunities across our platforms and services offerings and in the various international markets in which we operate. We remain committed to delivering total shareholder value and look to the future with confidence.'

EADS chief executive Tom Enders added: 'I'd like to thank everybody who supported us, in particular all the colleagues at BAE Systems and EADS for all their hard work and dedication to this project in recent months.

'A special thank-you goes to Ian King for his trust and partnership. It is, of course, a pity we didn't succeed but I'm glad we tried. I'm sure there will be other challenges we'll tackle together in the future. EADS will continue on its international growth path and our shareholders can continue to expect profitable growth, excellent liquidity and programme execution based on a strong order book.'