By Marcus Leach

The planned merger between aerospace and defence firms BAE Systems and EADS has been canceled after talks were thwarted by political deadlock.

It was announced that discussions would be terminated after it "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."

Ian King, chief executive of BAE Systems, said there was natural disappointment, given the unique nature of the proposed merger.

"We are obviously disappointed that we were unable to reach an acceptable agreement with our various government stakeholders," he said.

"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.

"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."

Tom Enders, chief executive of EADS, added that there may be future projects the two firms work on together.

"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," he said.

"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."

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