Aero-engine manufacturer Rolls-Royce has sold its tank-making unit Vickers to Alvis, in a move that completes the consolidation of the British armoured vehicle industry.

The deal looks set to make Alvis the country's biggest manufacturer of armoured cars.

Rolls-Royce and Alvis said they had agreed a price tag of £16.2m in cash, subject to the approval of Alvis shareholders and regulators in the UK and South Africa.

The rock-bottom price reflects faltering export orders for Vickers' flagship product, the Challenger II tank.

Demand for armoured vehicles has slumped steeply since the end of the cold war, triggering a wave of mergers and acquisitions among tank makers.

Jobs on the line?

Rolls-Royce chief executive John Rose said integrating Vickers' activities had created "significant" value for Rolls-Royce shareholders.

"This agreement offers the best future for [Vickers]," he said in a statement.

Alvis plans to merge most of Vickers' operations with its own UK armoured vehicle business, but engineering unit Vickers Bridging and South Africa-based light vehicle maker Vickers OMC will continue as separate firms.

There has been speculation that the takeover could lead to job losses, amid fears that Alvis may close Vickers' Newcastle tank factory.

Alvis chief executive Nick Prest said on Friday that acquiring Vickers presented "opportunities to improve cost efficiency through some rationalisation."

History

In the City, Alvis shares climbed 3 pence to 152p in early trade, while Rolls-Royce edged 3.75p lower to 141.25p.

Vickers Defence Systems notched up sales of £160m last year, while profits came in at £37m.

The company was part of the Vickers defence and engineering giant, known as the 'armourer to the nation' during World War II, which Rolls-Royce acquired for £576m in 1999.

Vickers sold the prestigious Rolls-Royce motor car firm, which was spun off from its original parent thirty years ago, to BMW in 1998.