Dassault Aviation SA has agreed to acquire Alcatel-Lucent SA's 20.78 per cent stake in Thales SA for about €1.57 billion ($2.24 billion) that will hike its influence at a major supplier of flight electronics for its aircraft.

Dassault Aviation makes the Rafale fighter and the Falcon corporate jet. It plans to pay €38 per share, according to a company statement. The aviation company already has around 5.2 per cent of Thales, and with the addition of this additional stake would hold only a little lesser than the 27.1 per cent held by the French state.

Between France and Dassault Aviation, they would control around 61 per cent of voting rights at Thales. It will also allow Dassault to dictate at least some terms at decisions at the important supplier, while helping the French government consolidate a key military asset.

In a statement, France's finance ministry said that strengthening the partnership between Thales and Dassault Aviation "allows for the creation of a world-class French centre of excellence in strategic technologies, aerospace, defence and security". It said that the move is simlar to the actions of the United Kingdom, Italy and Sweden, and builds around "core companies."

Dassault has been fighting an uphill battle for winning export orders for the Rafale fighter jet, having lost competitions for contracts to US rivals.

The French government has so far placed ordered 120 Rafales till date, and has promised to buy 294 in all. It is also in talks with Libya and the United Arab Emirates (UAE) amongst other nations for export orders.

European Aeronautic, Defence and Space Co., better known as EADS, is Europe's largest aerospace company that also owns around 46 per cent of Dassault Aviation. It was reported to be interested in acquiring a stake in Thales, even though it has not made a a binding offer till now. The Dassault family's Groupe Industriel Marcel Dassault holding company owns 50.2 per cent of Dassault Aviation, with the remaining being traded publicly.

In their statement, the companies said that the transaction would most probably close around the spring of 2009, subject to approval from the antitrust authoroties.

Paris-based Alcatel-Lucent, which is also the world's largest supplier of fixed line telephone networks, said that proceeds from the stake sale would give a boost to its finances, having accumulated €4.8 billion in losses since 2006. Around a week ago, Alcatel-Lucent announced cost reductions to the tune of around €2 billion ($2.7 billion between 2008 and 2010, and around 1,000 managerial job cuts. It also foresaw a decline in the telecom equipment market to the tune of eight per cent, hitting 12 per cent from the earlier 20 per cent. Reports also said that cash from the stake sales would help Alcatel-Lucent prepare better for manaing a long, painful economic scenario, even though it would not be able to delight investors for around six forthcoming quarters while remaining a "good" company to invest in.