Lockheed Martin Jilts Northrop

Defense giant Lockheed Martin called off its $8.3 billion deal to buy Northrop Grumman Corp. because of government opposition Thursday.

The announcement came just hours after a Defense Department spokesman said the Pentagon was unable to reach an agreement with Lockheed Martin and was prepared to press on with a lawsuit it filed in March to block the deal.

"Continuing the litigation at this point is simply not in the best interests of Lockheed Martin's customers, shareholders or employees," Vance Coffman, Lockheed Martin chairman and chief executive said in a statement.

A call to Lockheed Martin on Thursday evening was not immediately returned.

The Pentagon and Justice Department had argued the merger of the two aerospace giants would reduce competition in areas such as electronics and missile warning systems. The case had been scheduled to go to trial Sept. 8.

It was the biggest merger ever challenged by the federal government, and it would have solidified Lockheed Martin's position as the nation's largest defense contractor.

"We welcome this decision to abandon the transaction," said Joel I. Klein, the assistant attorney general for antitrust. "This means that the United States government and the American people will continue to receive the highest possible quality of military products and services in the defense of this nation, at the lowest possible cost to the American taxpayer."

Earlier in the day, Pentagon spokesman Kenneth Bacon said discussions with the two defense contractors on modifying the deal to meet antitrust concerns had gotten nowhere, and he added, "We're prepared and planning to litigate this case in court."