BAE targets TRW deal in US

BRITISH defence group BAE Systems is in talks with United States-owned TRW to acquire its military interests, which include missiles, communications and space equipment, in a deal that could cost it more than £4.6bn.

TRW has received a hostile bid from US defence company Northrop Grumman worth $6.7bn (£4.6bn), which expires on Friday. In a statement BAE said it was interested in the future of TRW and it 'may offer an opportunity to extend further BAE Systems defence activities in North America. The company has therefore established a dialogue with TRW'.

New BAE chief executive Mike Turner is keen on the group expanding in the US, the world's biggest defence market, where the Bush administration has gone on a $330bn defence spending spree. The problem for Turner will be the automotive parts business of TRW, which is in the doldrums.

BAE, Europe's largest defence company, has 22,000 defence workers in the US and is now the Pentagon's sixth-largest supplier of equipment to the American armed forces. The US defence department classifies BAE as a top-secret production company thanks to its US interests, with only US nationals allowed access to details of some of the missile, spying and communications equipment supplied to its forces.

Two years ago BAE acquired US aviation giant Lockheed Martin's aerospace electronics business and a control systems division. These could merge with TRW interests. BAE shares lost 16 1/2p to 358 1/2p.