Alvis builds the British Army's Challenger tanks

Britain's biggest defence firm said its 320 pence a share cash bid valued Alvis at �355m ($652m), topping US-based General Dynamics' offer of �309m.

Alvis' board, which previously backed the US firm's offer, said it would now support BAE Systems' bid.

Earlier, the government announced it had no objections to the takeover of Alvis by General Dynamics.

Jobs pledge

The decision came despite concern over the protection of classified UK data raised by the Ministry of Defence.

Competition minister Gerry Sutcliffe said he had decided against referring General Dynamic's bid to the Competition Commission.

He said the US firm had given pledges to protect sensitive British data and maintain UK manufacturing capacity.

Alvis builds the British Army's Challenger 2 tanks and employs around 2,800 workers.

It has operations in the UK, Scandinavia and South Africa, and customers in more than 40 counties.

BAE Systems currently owns 29% of Alvis' shares.

Delaware-based General Dynamics said its acquisition of Alvis would enable it to expand its operations in the UK and Scandinavia.