LONDON â€" Shares of the European aerospace giants EADS and BAE Systems tumbled on Thursday as investors reacted negatively to the announced merger talks between the two companies.
A leading shareholder in EADS, which is the parent of Airbus, also said that it would have to review the consequences of the potential merger before making a decision about the deal. If completed, the deal would create an industry giant with a combined market value of almost $50 billion.
Shares in EADS fell nearly 8 percent as of midday in Paris, while stock in BAE Systems, which is listed in London, dropped 6.6 percent.
Europe's two largest aerospace companies announced on Wednesday that they were in talks about a potential merger at a difficult time for the industry.
In the wake of the global economic slowdown, many countries are pulling back on their military spending. Sales of passenger airlines have improved recently, but have remained sluggish during the recent fina ncial market volatility.
Any potential merger also would have to navigate a minefield of regulatory approval, including in the United States and Europe, before a deal could be completed.
Despite the potential cost savings for combining each company's operations, investors, which include the French and Spanish governments, reacted coolly to the discussions.
The French conglomerate Lagardère, which owns a 7.5 percent stake in EADS, said on Thursday that it had not decided whether to support the deal.
“The Lagardère group intends to ensure that all consequences associated with the proposed EADS-BAE Systems merger are taken into consideration in determining the terms and conditions of the proposed transaction before it consents to the deal,†it said in a statement.
The combined companies would have annual sales of more than $90 billion and employee around 220,000 people worldwide.
Under British law, EADS and BAE have until Oct. 10 to dec ide whether to pursue the merger.
