The acquisition, to be carried out in two stages, would put Thomson-CSF on an equal footing with British Aerospace in the British optronics market, the French group said.

It would also solidify the firm's number-three global position, behind U.S. Defence groups Lockheed Martin Corp and Raytheon Co, in this core area.

"Electro-optics is a strategic part of our overall businessand this investment represents a further important step in developing our core competencies," said Thomson-CSF Chairman Denis Ranque in a statement.

Optronics includes such electronic visual equipment as infrared cameras, submarine periscopes as well as digital endoscopes for medical purposes.

The company said it would initially buy 24.9 percent of optronic systems and equipment maker Avimofrom minority holder Alvis for a price of 130 pence, or 3.6 Singapore dollars per share.

The agreement also contains put and call options allowing for the acquisition of Alvis' remaining stake in Avimo, which represents roughly 17.1 percent of the group's capital.

The price paid for the entire 42 percent stake represents a premium of roughly 50 percent above Avimo's average share price over the past six months, the French group said.

At 1200 GMT, Thomson-CSF's share price was down 0.86 percentat 33.30 euros. Alvis Plc stock, which is listed in London, was up 1.87 percent at 138 pence.

Bernard Rocquemont, a senior vice-president and head of the company's optronics business, told reporters that Thomson-CSF wanted Avimo to keep its stock listing in Singapore and had no plans to raise its stake above 50 percent.

"Between 42 and 50 percent is ideal," Rocquemont said."Avimo has an active management with plans for additional projects and the stock listing will permit them to finance these projects."

Theacquisition of the Avimo stake follows Thomson-CSF'spurchase of 90 percent of UK-based Pilkington Optronics last year and the July 1999 purchase of the electro-optics business unit of AlliedSignal Aerospatiale Canada, a unit of AlliedSignal .

And the French company said that other deals inthe area of optronics were "under discussion".

The Avimo deal takes Thomson-CSF's annual optronics-relatedrevenues from 420 million euros to roughly 530 million. The company still trails Lockheed Martin, with 860 million euros in annual optronics revenues, and Raytheon with 820 million.

Rocquemont said the deal would give Thomson-CSF and BritishAerospace an equal 40 percent share of the UK optronics market and add roughly 500 million French francs (76 million euros) to annual UK-based revenues.

Although it declined to give specific synergy-relatedfigures, the French group said Avimo -- with annual revenue and net income growth of roughly 25 percent -- would contribute to increased profitability.

It also said thestake would open up the Asian market forthe company. "We will profit from this presence," Rocquemont said.

Avimo has a total of 1,350 employees, 500 of which are basedin Britain and 530 of which are in the company's home-base of Singapore.