According to BBC News, the companies ended discussions after talks between the three governments collapsed over how much of a stake they would each own.
Robert Peston, BBC’s business editor, reports the British government wanted its counterparts to limit their stakes in the merged firm and protect BAE’s working relations with the U.S. Defense Department.
Sky News reports Britain wanted to ensure that the French and German governments did not own more than an 18 percent combined stake in a new company.
Germany and France wanted to hold 27 percent combined in the new company but Sky also reports German Chancellor Angela Merkel opposed the deal altogether.
Currently, France holds a direct stake in EADS and Germany holds influence through shares owned by Daimler AG, while the U.K. government holds a golden share in BAE and can block any takeover attempt.