Ian King, Chief Executive of BAE Systems, said he was "obviously disappointed" but insisted the business remained robust. He 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.
However, our business remains strong and financially robust....We remain committed to delivering total shareholder value and look to the future with confidence.
It has not taken long since the collapse of the proposed merger with Franco-German company EADS for the BAE board to be put under pressure.
The EADS and BAE mega merger is not going to go ahead, at least for now.
Talks between the two major defence companies continued into the night as they look to strike a deal.