France's Safran confirmed a $1.09bn (£696m) deal to buy L-1 Identity Solutions and its core biometric identity business in a move that will also see BAE Systems extend its reach in the United States.
Safran, which makes aero engines, military goggles and security equipment, said shareholders would get $12 a share in cash in the deal which will see L-1 assets split between the two European buyers.
The shake-up is the latest sign of mid-tier security and defence firms getting snapped up by traditional arms suppliers.
As the top contractors face sharp cuts in defence budgets, they are steadily targeting smaller players with niche technologies in cybersecurity, surveillance and intelligence.
In a carefully sequenced transaction which nets L-1 shareholders slightly more than the $11 or so per share expected by some analysts, L-1 first agreed to sell its government consulting services business to BAE Systems for $296m.
The takeover, which has been backed by the boards of both companies, will see the French state-owned aerospace and defence company buy the whole of L-1 but keep only its core biometrics and identity businesses, which are spread across three units.
L-1 said it expected the deals to close in the first quarter of 2011 and that its board had approved both the Safran merger and the BAE transaction.
Regulators and L-1 shareholders must approve the deal.
L-1 formed in 2006 through a merger of Viisage and Identix.
The company placed itself up for sale in February but moved to split the deal into two parts given a distinction between its biometric identification and government consulting businesses.
Safran, already a player in biometrics, led the race to buy most of L-1 including the biometrics and identification activities as it boosts its security activities.
The French deal was contingent, however, on L-1 first lining up a definitive buyer for the government consulting business.
BAE Systems has built up a presence through acquisitions as a leading player in the U.S. defence industry.
City A.M. Reporter