BAE has sent a notice to all its 93,500 employees explaining the "disappointing outcome" of its merger talks with EADS.
The letter, written by CEO Ian King, states:
Over the past few weeks, we have been in discussion with EADS about a potential combination of our companies. We have now decided to end these discussions.
From the start of these talks, I was clear that we would only proceed with a merger of our businesses if a structure could be created that aligned the interests of our stakeholders and received their strong support. I did not underestimate the challenges in achieving this but felt that given the additional value this strategic opportunity would create for our shareholders, it was worth exploring.
Notwithstanding a great deal of constructive discussion with governments, it became clear that the interests of our stakeholders could not be adequately aligned with each other or with the objectives that we had established for the merger. I therefore decided it is in the best interests of BAE Systems and our shareholders to terminate the discussions.
This is a disappointing outcome as there is no doubt in my mind that the merger represented an opportunity to bring together two strong and successful companies into a group that would be greater than the sum of its parts. BAE Systems is a strong, independent and financially robust company that is successfully implementing its strategy.
We remain committed to developing our position as a world-class engineering company with a significant international footprint and growing our platform and services positions, together with our cyber, intelligence and security and electronic systems businesses.
Mr King also highlighted that BAE would "remain close partners with EADS" and thanked BAE's employees for their "support, determination and hard work".
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.