BAE Systems is planning to hoist a "for sale" sign over its Atlas Elektronik business, one of the biggest suppliers to the German submarine industry.
The move is part of BAE's strategy to shift its focus from Europe to America, following its $4bn (£2.1bn) acquisition of United Defense Industries of the US, announced last month.
In March, BAE appointed Deutsche Bank to review the "strategic options" at Atlas. A well-placed source claimed this would almost certainly lead to a sale. Analysts said that the unit, which last year generated revenues of around €300m (£205m), could fetch between €290m and €370m.
A BAE spokesman said: "We are exploring our options with Atlas. We are not turning our backs on Europe, but there are more opportunities in the US."
Earlier this year BAE sold its avionics unit to Italy's Finmeccanica. It has also scaled back its joint ventures with Sweden's Saab and a separate venture with Finmeccanica. And there is now speculation over whether BAE will sell its 37.5 per cent stake in MBDA, a missile business in which it is partnered by France's Matra.
BAE considers the German and French markets virtually closed because of the countries' limits on foreign firms getting involved in their defence markets.
Defence companies are already circling Atlas, which employs 1,600 people. Sources said that interested parties are EADS, the Franco-German aerospace giant; Thales, the defence group one-third owned by the French government; and L-3 Communications, the New York electronics company. Carlyle, the private equity company that is keen to build up its holdings in the defence market, is also said to be interested.
Foreign bidders may face opposition from the German government as civil servants are said to be interested in returning Atlas to German ownership. This is because the electronic systems it supplies to the country's navy are top secret.
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