Thales agreed to acquire Alcatel‘s 67 percent stake in satellite manufacturer Alcatel Alenia Space, the companies announced April 5.

Thales will issue 26.7 million shares of stock to Alcatel and will pay 673 million euros ($819.9 million) in cash at the close of the deal. Thales also may pay an additional amount to Alcatel at the beginning of 2009 based on the value of the 67 percent share.

The deal, which also includes Alcatel’s railway signaling business and its integration and services activities for mission-critical systems, follows Alcatel’s April 2 announcement that it will merge with Lucent Technologies Inc. Following the conclusion of the transaction, Alcatel’s stake in Thales will increase from 9.5 percent to 21.6 percent. Groupe Industriel Marcel Dassault will retain its 5 percent share in Thales, while the French government will remain the majority shareholder with 27.1 percent.

Alcatel Alenia Space was created in 2005 when Alcatel and Finmeccanica merged their respective satellite operations. Finmeccanica, which holds the remaining 33 percent stake, also must approve the deal, and the transaction also is subject to regulatory approvals.

“The move with Alcatel is a truly industrial project which is entirely coherent with Thales’ strategy,” Denis Ranque, Thales Chairman and CEO, said in a statement. “It strengthens the group and positions it at the heart of future consolidation operations within the European Critical Systems for Defense and Security industry. In this way, the group is in an excellent position to pursue discussions with its European partners.”

The acquisition is expected to increase Thales revenues by more than 2 billion euros ($2.4 billion) per year, the company said. Thales also expects to derive operational savings of about 50 million euros ($60.9 million), but the company said it would not lay off any employees.