Vickers will sign a memorandum of understanding with the state-owned group to the effect that it will co-operate on a range of activities and form a new company, owned 50-50 between Vickers and Giat.
The company will concentrate on developing armoured vehicles in competition with the "battlefield taxi", a multi-purpose armoured car being commissioned by the German and British governments.
Vickers recently lost the race to win an order for the battlefield taxi to Alvis, the rival armaments firm which is part-owned by GKN, Vickers' main rival.
The deal with Giat is the outcome of a year-long search by Sir Colin Chandler, chief executive of Vickers, for a partner in the armoured vehicles industry. Vickers also considered a link-up with Rheinmetall, a German rival, and the US-based Carlyle group.
European governments have been pressing for consolidation in the armoured vehicles industry because of declining orders and a serious problem of over capacity. While around 20 manufacturers make the vehicles, only a handful of governments are likely to place substantial orders.
The joint venture with Giat will link Vickers with France's leading manufacturer of LeClerc tanks, competing for export orders from South Africa and Greece.
A deal will bring Vickers one stage closer to its aim of ditching its non-core activities and focusing on marine technology. It is also a success for Paul Buysse, the chief executive, who has been seeking to re-focus the group since his arrival last year.
In July, Mr Buysse, formerly of BTR, secured the pounds 479m sale of Rolls- Royce Motor Cars to Volkswagen of Germany. The purchase price included an element of compensation for previous investments ploughed into Rolls- Royce by Vickers.
The sale helped Vickers to buy Ulstein, a Norwegian marine equipment company, for pounds 300m. Vickers already has a presence in marine technology through its subsidiary, KaMeWa. The company still has pounds 200m in cash to spend on further acquisitions.Reuse content