(Reuters) - EADS and BAE Systems called off the world's largest defense and aviation merger on Wednesday, and sources close to the talks blamed Germany for wrecking the $45 billion deal.
BAE said it had become clear that the interests of the French, British and German governments could not be reconciled with each other or with the objectives that BAE and EADS established for the merger.
"BAE Systems and EADS have therefore decided it is in the best interests of their companies and shareholders to terminate the discussions and to continue to focus on delivering their respective strategies," BAE said in a statement.
Securing such an enormous and complicated cross-border deal in a sector where commercial considerations are typically trumped by political, economic and national security concerns was always going to be desperately difficult.
The companies had until 1600 GMT to declare their intentions and either scrap the merger, ask British regulators for more time or finalize their plans to create a group employing nearly quarter of a million people that could compete with U.S. rival Boeing.
"Germany blocked the deal, although all demands from the German side were met. Top German negotiator Lars-Hendrik Roeller was the one who formulated all demands and said no in the end," a source close to the deal said. Roeller is Chancellor Angela Merkel's senior economic adviser.
Before the talks collapsed, several sources close to the negotiations had said Merkel opposed the proposal to combine Airbus passenger aircraft with UK defense contractor BAE.
"Merkel is against the deal but has not given reasons," another source involved in the talks had said.
Sources said Germany had wanted parity with France in the shareholding of the new group, plus the basing of some company headquarters in the German city of Munich.