BAE says UAE pulls out of Typhoon talks

(Corrects name of Rafale manufacturer in fifth graph, adds RIC)

LONDON, Dec 19 (Reuters) - BAE Systems (LSE: BA.L - news) said the United Arab Emirates had decided not to proceed with a deal for Eurofighter Typhoon aircraft, in a surprise move by the Gulf state after months of discussions.

"The UAE have advised that they have elected not to proceed with these proposals at this time," BAE said on Thursday.

"All parties have invested significant effort in drawing up Typhoon proposals for the UAE and, recognising the risk, scale and complexity of such a transaction, the Group had not built this prospect into its planning assumptions," it said.

Speculation that the Gulf state would pick the Eurofighter consortium, made up by BAE, EADS (TLO: EAD-U.TI - news) and Finmeccanica (Frankfurt: FMNB.F - news) , to supply at least 60 aircraft to replace its ageing Mirage fleet mounted after British Prime Minister David Cameron visited the Dubai Airshow to urge the region's leaders to buy the aircraft last month.

The UAE was choosing between the Eurofighter and France's Dassault Aviation (Paris: FR0000121725 - news) 's Rafale aircraft for the order.

BAE added on Thursday that it is still in talks with the government of Saudi Arabia over pricing of Typhoon jets.

"Whilst good progress has been made, a definitive agreement has yet to be reached. A timely agreement in the new year would be reflected in trading for 2013," BAE said in the statement.

The company previously said that should the Saudi deal fail to be completed this year, it could hit its earnings per share by 6-7 pence for 2013. (Reporting by Li-mei Hoang and Brenda Goh; Editing by Elaine Hardcastle)