Saab AB announced Monday it is acquiring Ericsson Microwave Systems. The acquisition adds world-leading radar and sensor operations to Saab's product portfolio in defense, aviation, space and civil security.

The purchase price is 3.8 billion kronor ($520 million). The purchase also includes Ericsson's 40 percent share in Saab Ericsson Space.

Saab Ericsson Space, currently owned jointly by Saab and Ericsson, will now be totally owned by Saab, which also increases the potential to consolidate Saab's position as Europe's largest subcontractor for equipment for commercial satellites, the company said in a news release.

The deal permits Saab to offer competitive and complete defense systems on the international market, the company said. EMW will change its name to Saab Microwave Systems and become part of the company's Systems and Products business segment.

EMW's defense operation has over 50 years of experience with radar development and the company has supplied more than 3,000 radar systems in more than 30 countries.

EMW's national security, personal safety and power systems, involving 300 of its 1,250 employees in Gothenburg, Sweden, will remain part of Ericsson.

The defense operation within EMW turns over approximately 2 billion kronor ($270 million) with good profitability, Saab said, and at the start of 2006 had an order backlog totaling approximately 3.5 billion kronor ($480 million). Exports make up approximately 65 percent of turnover. EMW's defense operation holds total assets of some 3 billion kronor ($420 million).

Saab will finance the acquisition with its existing liquid funds, and the deal is expected to be completed in September 2006.

Beginning in 2007, Saab said it expects the purchase to improve its profit per share, while depreciation and restructuring costs are anticipated to cause a reduction in the operating margins and profit per share for 2006.

Saab said its long-term sustainable financial objective of a 10 percent operating margin remains. The acquisition requires approval of the monopolies-and competition authorities in Sweden.

Saab said it and Ericsson also intend to evaluate opportunities for future co-operation in the areas of national security and public safety, where the companies' relative strengths are complementary.