BAE Systems Plc will cancel the auction of its Platform Solutions unit and keep the division after months of talks with potential buyers resulted in no agreement, the company said on Tuesday.

The British defense contractor, which hired JPMorgan Chase & Co and Wells Fargo to sell the business last year, said no sale has been agreed despite considerable expressions of interest and the company would no longer pursue the sale of the business.

Bankers and analysts said the unit, which makes aerospace parts including aircraft engine controls, could fetch $1.5 billion to $2 billion for BAE.

Shares of BAE fell 2 percent immediately after BAE confirmed the sale was off. The stock recovered some ground and was down 0.3 percent at 339.4 pence on the London Stock Exchange, valuing the company at around 11.6 billion pounds.

BAE Systems received three final bids, including one from General Electric Co , but determined that better earnings at the division makes a sale unnecessary, a source close to the company told Reuters earlier on Tuesday.

People familiar with the matter told Reuters previously that GE, industrial company Eaton Corp and private equity firm Warburg Pincus submitted final bids for the BAE unit.

We've always said it was a strong business and we did say there was no guarantee we'd sell it, a BAE spokeswoman in London told Reuters. We have done a strategic review of the business and decided it will be in our best interests to hold on to it.

Representatives for GE, Eaton and Warburg were not immediately available for comment.

BAE sought at least 9 to 9.5 times the unit's earnings before interest, tax, depreciation and amortization (EBITDA) of slightly less than $190 million -- or $1.7 billion to $1.8 billion -- but bidders wanted to pay below the range, the people said previously.

The BAE unit is among several aerospace assets that have been pulled from auction processes over the past year partly because buyers and sellers failed to narrow differences over the prices.

Private equity firm the Carlyle Group canceled the auction for aviation company Arinc last year after no potential buyer was willing to meet Carlyle's asking price of between $1.3 billion to $1.5 billion, people familiar with the matter said. Goldman Sachs was adviser on the sale.

BAE's Platform Solutions unit makes digital engine controls, which govern fuel flow and control variable engine geometries and are used in a wide range of aircraft, including the Airbus A320 and the Boeing 737 -- the two hottest-selling passenger planes in history.

GE is a major customer of BAE's aircraft engine controls and the involvement of GE in the auction process made it difficult for its key competitors in the aircraft engine market to pursue the BAE assets, people familiar with the matter told Reuters previously.

The BAE unit also includes a commercial avionics business, which it bought from Boeing Co in 2004, that makes aircraft components that help with navigation and surveillance, as well as a division that makes hybrid propulsion systems for buses and trucks. It employs 4,200 people at sites worldwide.

(Reporting by Soyoung Kim and Rhys Jones in London. Editing by Maureen Bavdek, Robert MacMillan, Dave Zimmerman)

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