BAE Systems, Europe’s largest defence company, has bought Tenix for ₤356 million to become the biggest supplier of equipment to Australia’s armed forces.

The deal will more than double BAE’s revenue in Australia to A$1.2 billion a year and give it access to the country’s shipbuilding industry for the first time.

The Salteri family in Australia put the defence assets of its Tenix industrial conglomerate up for sale last year after a business review by UBS, which has handled the auction.

BAE is understood to have beaten L3, the Amercian defence company, Carlyle Group, a private equity firm, and Leighton Holdings, an Australian industrial group, in the final round of bidding.

United Group, Raytheon, General Dynamics, Macquarie Bank, Babcock & Brown and Transfield Services are all thought to have expressed an interest but dropped out of bidding.

The acquisition of Tenix strengthens BAE’s ambitions to develop its business in six “home markets”: the UK, USA, Saudi Arabia, Australia, South Africa and Sweden.

The company’s recent strategy has been to develop its North American business, most recently agreeing the ₤225 million takeover of MTC Technologies on Christmas Eve.

The acquisition of Tenix is a rare opportunity to expand in another of its core markets and BAE is estimated to have paid a substantial premium to take control of the group.

The Salteri family’s decision to quit the defence business is thought to have been prompted by a need to spend large sums of money developing the next generation of defence equipment.

The family will retain Tenix’s aviation division, which maintains commercial aircraft, and Tenix Solutions, which manages vehicle traffic systems.

Last year, Tenix Defence made A$56 million in profits on sales of about A$700 million, but the revenues are highly variable depending on defence contracts. Merging the business with BAE’s existing Australian operations will help to smooth out some of the earnings fluctuations in the business.

Mike Turner, chief executive of BAE Systems, said: "This acquisition more than doubles the size of our Australian footprint, making BAE Systems the largest, in-county, through-life capability provider to the Australian Defence Force."

The decision to sell Tenix was made two months ago, just before the company was awarded a A$3.1 billion contract to build two Canberra-class amphibious landing ships for the Navy. The company has also built eight Anzac frigates for Australia and two for New Zealand in a deal worth A$6 billion.

BAE has also benefited from the Australian government’s decision to upgrade its land vehicles. The group has been named preferred bidder for a £330 million contract to supply about 2,500 armoured trucks to its army.

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