HAMPSHIRE based defence giant BAE Systems has unveiled a £2.09 billion deal to buy US rival United Defense Industries.

The move will help BAE capitalise on the increase in spending by the Pentagon as it combats the growing threat of terrorism and maintains operations in Iraq and Afghanistan.

United Defense, which employs around 8,000 staff at 25 sites in the United States and Sweden, generated sales of £1.19 billion last year.

It designs and develops combat vehicles, artillery systems, naval guns, missile launchers and precision munitions used by the Pentagon and its allies.

Farnborough based BAE employs 160 people in Southampton and more than 2,500 across the county and is the UK's largest defence and aerospace group, owning a stake in aircraft giant Airbus and taking part in the production of the Eurofighter Typhoon.