By Arno Schuetze
FRANKFURT (Reuters) - German defense group RHEINMETALL (RHM.XE)
The two companies as well as U.S.-based Raytheon
The price tag on the sale, dubbed "Orlando", which is led by investment bank Evercore
Airbus, Europe's largest aerospace group, is currently selling several businesses to focus its defense division on warplanes, missiles, launchers and satellites.
Thales Chief Executive Patrice Caine declined to comment on any specific talks, but told analysts that such opportunities were difficult to predict.
"Defense deals can only be opportunistic; it is too complex to make firm bets on a defense deal," he said in a conference call when asked about the company's criteria for expansion.
A Rheinmetall spokesman said the company was following the divestment activities of Airbus, declining to comment further.
The other companies and private equity investors all declined to comment.
Europe's defense industry is struggling as most governments are keeping a lid on military spending and the asset sales are part of efforts announced by Airbus last year to sell half a dozen businesses with combined annual revenues of around 2 billion euros.
The move breaks with the company's previous efforts to diversify into security activities and halts investment in defense electronics, in which it lacks the scale of rivals.
The business up for sale under the "Orlando" deal makes components for radars, optronics, electronic warfare and border control applications and has about 100 million euros in annual earnings before interest, taxes, depreciation and amortization on 1 billion euros in sales.
The products are used, for example, in surveillance or for equipment that helps pilots to fly in fog or at night.
Acquiring the business would allow Airbus's European defense peers to boost activities in an important area.
But after looking at the initial information packages on the deal, some potential buyers said they doubted the business's financial prospects and did not expect it to sell at a high valuation.
Although widely seen as a less likely outcome, defense sources said selling the sensors business to a non-European buyer would deal a further blow to the controversial Euro Hawk reconnaissance drone, which has been in limbo since Germany canceled it in 2013 over high costs.
There have been reports that Berlin might revive the drone, developed by U.S. contractor Northrop Grumman
The will to keep technology and jobs within certain regions, may hand German bidders good chances, as the business is significantly Germany-based, one of the sources said.
But a third person said that any buyer would be sensitive to these matters and the nationality of the bidders did not really say much about qualities as a long-term owner.
In a separate deal, led by Lazard
Disposals of other smaller businesses are also gaining pace. Airbus is in talks with a German investor over the sale of its ESG Elektroniksystem und Logistik business, which has about 250 million euros in sales, a person familiar with the matter said.
Atlas Elektronik, a joint venture with ThyssenKrupp
The German steelmaker is ready to buy the remaining stake in the supplier of sonar systems for maritime security it does not already own, but only at a price it deems reasonable, a person familiar with that process said.
Last month, Airbus also sold a further stake in Elbe Flugzeugwerke to Singapore-based ST Aerospace, which now controls 55 percent of the maker of freight aeroplane components.
(Additional reporting by Sabine Siebold, Georgina Prodhan, Anneli Palmen, Andrea Shalal, Hasan Saeed and Tim Hepher; Editing by Jane Merriman and Mark Potter)