Armor Holdings, which makes armoured vehicles and other equipment for the US military and law enforcement, said on May 07 it had agreed to be taken over by British-based BAE Systems for 4.5 billion dollars.
BAE already has a strong presence in the US market, but a take-over of Florida-based Armor would significantly boost its growing operations in one of the world's largest defence markets.
Under the deal's terms, BAE will pay 88 dollars per share, or 4.1 billion dollars in cash, and assume some 388 million dollars in debt from the US group.
The British firm, which sold its stake in European aircraft maker Airbus last year, said the deal still has to be approved by Armor's shareholders and the US government.
"We are excited to move this business to the next phase of its development. We have no doubt that BAE Systems will place the needs of our customer and those of the men and women in uniform who depend on our products at the centre of their ongoing effort," said Armor president Robert Schiller.
BAE hopes the deal will win it a bigger share of lucrative Pentagon contracts, although it has already stacked the board of its US group with big hitters including former Democratic congressman Lee Hamilton, former US Central Command chief and retired general Anthony Zinni and former CIA deputy director Richard Kerr.
The British firm's York, Pennsylvania, plant churns out Bradley fighting vehicles for the US military which are used extensively in Iraq.
BAE also supplies components for the Joint Strike Fighter and runs ship repair facilities for the US Navy in Norfolk, Virginia, and San Diego, California, among other operations.
Company officials say the US market now represents some 36 percent of BAE's overall sales, but that an Armor deal would boost that to around 42 percent of sales.
Armor makes and supplies "tactical" vehicles, body armor and vehicle armor systems for military, law enforcement and commercial customers. It booked net profits of 214 million dollars in 2006.
The Jacksonville, Florida, firm employs over 8,000 workers and claims a presence in 63 countries. The acquisition also is subject to regulatory approval under US national security laws.
Britain's Labour government recently dropped a probe into a multi-billion pound (dollar) BAE arms deal with Saudi Arabia in a case that generated widespread media scrutiny in London.
Britain's Serious Fraud Office had been investigating allegations that BAE had set up a secret slush fund for members of the Saudi royal family to secure continued business, dating back to a big arms deal in the 1980s. BAE denied any wrongdoing.
The British government stopped the probe in December on "national interest" grounds after it said Saudi Arabia had threatened to sever security links if it continued.
"The proposed acquisition is conditional, amongst other things, upon receiving certain required regulatory clearances and the approval of Armor Holdings' shareholders and is expected to close in the third quarter," said Walt Havenstein, the chief executive of BAE's US operations.