“We had clear red lines that we were not willing to go beyond, relative to engagement and involvement of governments,” BAE’s CEO Ian King said. “If that was going to impinge on our ability to commercially run this new merged organisation, and support and develop our existing business, then we wouldn’t go to that point, and that is where we are today.”

NEGOTIATIONS

Ultimately, German officials said, the parties were unable to resolve the shareholding issue to everyone’s satisfaction. Paris wanted to retain the option of going up to 13.5 percent by buying a stake held by French firm Lagardere at a later date. German officials insisted they be able to follow suit.

The British wanted a cap of 10 percent each, concerned that the Germans and French could approach a blocking minority if they went above that level.

Still, the companies believed they could have bridged the differences if Germany was more willing to negotiate.

“France and the UK agreed that Germany have the same stakeholding as France in the merged group. Separately, vast guarantees were given regarding safeguarding national security interests, sites, jobs. The topic of headquarters was being discussed very emotionally, but not an issue big enough to let the deal fail,” a source close to the transaction said.

The merger would have created a group employing nearly a quarter of a million people that could better compete with U.S. rival Boeing.

Asked whether BAE management felt under pressure as a result of the stormy investor reaction followed by the collapse of the plans, King said: “Certainly not. No more than usual”.