Chris Jasper/LONDON

Thomson-CSF has agreed to buy the UK's Racal Electronics for £1.32 billion ($2.16 billion) in a move that further strengthens its position in defence electronics and systems.

The purchase consolidates French company Thomson-CSF's status as Europe's third major defence player behind BAE Systems and European Aeronautic, Defense and Space. The agreement also expands its nascent high-technology commercial and industrial electronics operation.

Thomson chairman and chief executive Denis Ranque says the acquisition "represents a major step in our development as a global electronics and systems group". The company adds that the deal will create a European defence contractor "with increased world-leading capabilities in the areas of military communications, electronic warfare systems and radar, which will be a leader in battlespace digitisation with a strong systems capability".

The Racal move, adds Thomson, will give it "critical mass" in the UK, allowing it to compete as a prime contractor for the Ministry of Defence, which appears to have encouraged the deal to foster competition in the wake of the British Aerospace/ Marconi merger.

The purchase follows Thomson's assumption of full control of Shorts Missile Systems, previously a joint venture with Bombardier, and together the deals represent a major return to the merger fray for the French company, which seemed in danger of being left behind by the pace of European consolidation.

While Racal's Defence Electronics division is its flagship operation, Thomson was also attracted by Industrial Electronics, which looks set to be folded into its own, recently created division bearing the same name.

Racal's other businesses - including Transportation Services and its UK lottery holding - may be sold.

Source: Flight International