British arms manufacturer BAE Systems and European aicraft manufacturer EADS are holding talks over a possible merger, the pair announced on Wednesday. \"Further to the recent movement in BAE Systems\' share price, BAE Systems plc and EADS confirm that they are in discussions regarding a possible combination of their businesses,\" said in a joint statement, adding that the talks envisaged BAE Systems owning 40 percent of the enlarged group, with EADS holding a majority 60-percent stake.