PARIS, Oct 10: A merger to create the biggest aerospace and defence group in the world from EADS and BAE Systems collapsed on Wednesday, with analysts saying Germany shot it down to avoid being sidelined.

The two groups issued a statement announcing the failure, and a source close to the talks said they fell through because of government opposition, especially from Germany. It had looked late on Tuesday as if France had opened the way for an extension of the talks, with sources

saying Paris had agreed to limit its shareholding.

But observers said Germany torpedoed the deal to create a giant worth $45 billion (35 billion euros), because the power behind the civilian arm of the group would shift completely to Toulouse in southern France where airliner maker Airbus is based.

Berlin was also said to fear that the group’s military operations would be run from London where BAE Systems is based.

“BAE Systems and EADS announce that they have decided to terminate their discussions,” the firms said in a statement.

“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.”

Asked whether BAE Systems had found more agreement with France than with Germany in the tie-up talks, BAE chief executive Ian King told reporters: “That would be an accurate representation.”

But German Defence Minister Thomas de Maizihre, on a visit to Brusssels, said he had taken note of opinion pointing a finger at Germany and was “not totally surprised,” but added he “did not share” that point of view.

“It’s an entrepreneurial decision,” Maizihre said.

Under British financial market regulations, EADS and BAE Systems were bound to say by Wednesday evening in London whether they planned to pursue a merger.

In Berlin, government spokesman Steffen Seibert said it “was now crucial that EADS grow on its own.”

“For the German government, the priority now is that EADS continues to develop positively in all its business activities.”

French President Francois Hollande also said the decision to call off the merger stood with the firms.—AFP