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Last Updated: Wednesday, 22 October, 2003, 11:46 GMT 12:46 UK
Merger rumours dent BAE shares
Eurofighter plane
BAE is the UK partner in the Eurofighter project
Shares in BAE Systems, the UK defence contractor, fell as much as 4% on Wednesday after reports that US firm General Dynamics had walked away from exploratory merger talks.

There has been persistent speculation about a US tie-up for the UK's biggest defence firm.

Some investors have argued that finding a US merger partner is crucial if BAE is significantly to expand its business in the valuable US market.

BAE said the report, in the Financial Times newspaper, was "speculative" and the company talked "to all sorts of companies".

UK's biggest defence contractor
Looking for US merger partner
Owner of 20% stake in plane maker Airbus

The FT report said General Dynamics had cooled on the idea of a merger after a visit to London earlier this month by its chief executive Nicholas Chabraja.

It said the US firm was interested in BAE's US business but not the UK units, which include the troubled Astute submarine and Nimrod maritime patrol aircraft programmes.

By early afternoon, BAE Systems shares had recovered slightly to be 2% down at 176.25 pence.

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