Defence firm BAE Systems PLC says it is in talks to combine with Airbus parent EADS NV

LONDON – U.K. defence contractor BAE Systems PLC and European aerospace giant EADS NV said Wednesday they are in talks about combining their businesses.

The companies said that under the proposed merger, BAE Systems shareholders would own 40 per cent and EADS shareholders 60 per cent of the enlarged group.

In a statement to the London Stock Exchange confirming the discussions, BAE and EADS pointed to a “long history of collaboration” on projects such as the Eurofighter Typhoon jets, which are partly assembled in Britain and then built by EADS elsewhere in Europe.

The deal would unite the companies’ boards and management but they would continue to be listed separately on stock exchanges, the statement said.

U.K.-based BAE and Leiden, Netherlands-based European Aeronautic Defence & Space Company acknowledged the sensitive nature of its global businesses and said it has has initiated discussions with “a range of governments” about the implications of any possible merger.

The companies have until Oct. 10 to announce a deal or that they don’t plan to pursue a merger.

Last month, U.K.-based BAE reported a slight dip in first-half profits and cautioned about its U.S. outlook amid uncertained over defence spending ahead of November’s presidential election.