Stocks in British arms manufacturer BAE and European planemaker EADS plunged on Thursday after the firms said they were in merger talks to create a global aerospace and defence leader that would better rival US giant Boeing.
EADS stocks plunged 8.93 percent to 25.50 euros in Paris opening trade, underperforming the market which was down slightly by 0.16 percent. The stock had already lost 5.63 percent a day ago shortly after the announcement.
In London, BAE Systems fell 6.49 percent to 340 pence, against a flat overall market, reversing gains of 7.39 percent a day ago.
The firms said that the talks envisaged BAE Systems owning 40 percent of the enlarged group, with EADS holding a majority 60-percent stake.
The companies said in a statement that a deal would "create a world class international aerospace, defence and security group with substantial centres of manufacturing and technology excellence in France, Germany, Spain, the UK and the USA."
Citigroup downgraded its "buy" rating on EADS on Thursday to "neutral".
"We believe that achieving merger synergies for the combined entity could be difficult, particularly given the need to ring-fence certain strategically sensitive activities," said Citigroup.