Read as much as you want on BostonGlobe.com, anywhere and anytime, for just 99¢.

European defense deal is derailed

LONDON — A deal to create a European defense and aerospace giant to rival Boeing Co. collapsed Wednesday when BAE Systems and EADS NV called off merger talks in the face of government objections.

The companies said they had ‘‘decided to terminate their discussions’’ over the proposed $45 billion tie-up because of conflicting interests between the British, French, and German governments.

Continue reading below

‘‘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 companies said in a statement.

The proposed merger between Britain’s BAE and Franco-German EADS, the parent of Airbus, would have created a company with a market value just shy of Boeing’s.

But from the start, investors were skeptical about the deal because of the political disagreements. All three governments had to approve the deal for it to go ahead.

‘‘It’s not up to me to regret or rejoice,’’ French President Francois Hollande said. ‘‘The French state as shareholder made known a certain number of arguments, of conditions. Our German friends had a certain number of criteria that were important to them. The British did the same. And the companies came to their conclusion.’’

The companies confirmed the end of their discussions just hours before a deadline on whether to go ahead with the merger, ask for more time, or call it off.

The chief executives of both companies had emphasized that the merger was sought not out of necessity, but in the hope of leapfrogging Boeing to the number one spot.

A number of concerns were instantly raised, including the scale and location of any job cuts. Questions were also raised about what the deal would do to the delicate balance that Germany and France have achieved in EADS after years of bickering.

German officials never appeared keen on the deal, preferring EADS to stay the way it was.

The British government was wary about what the prospective deal would do to BAE’s big business dealings with the United States, as well as the scale of the involvement of other governments in the combined entity’s affairs. If the new entity was perceived as state-owned, it could affect its ability to vie for contracts in the United States and Asia.

BAE’s biggest shareholder, Invesco Perpetual, which owns more than 13 percent of the group, also relayed its concerns that the merger could threaten BAE’s US defense contracts. BAE is a central lynchpin of the commercial relationship between the United States and the United Kingdom.

In the end, these objections proved too difficult to solve, derailing a deal that would have created a company with annual sales of around $90 billion and a combined global workforce in excess of 220,000.

‘‘That government disagreements killed this deal carries a lesson for consolidation of the European defence market as a whole,’’ said Guy Anderson, a defense industry analyst at IHS Jane’s.

Loading comments...

You have reached the limit of 10 free articles in a month

Stay informed with unlimited access to Boston’s trusted news source.

  • High-quality journalism from the region’s largest newsroom
  • Convenient access across all of your devices
  • Today’s Headlines daily newsletter
  • Subscriber-only access to exclusive offers, events, contests, eBooks, and more
  • Less than 25¢ a week