BAE Systems announced the latest acquisition in its expansion drive last night - a leading IT supplier to the Pentagon.

Europe's largest defence group will play a more central role in the war on terror following the purchase of DigitalNet Holdings for £334m.

BAE said the deal would enhance its ability to address evolving US national security procedures and boost earnings within the first year of completion.

DigitalNet makes secure computer networks that can carry sensitive data.

BAE's operations in North America will now generate revenues of more than £668.3m from the sale of IT systems to US Government agencies.

In addition to the Pentagon, DigitalNet makes secure computer networks for national intelligence agencies and the Departments of Homeland Security, Justice, Treasury and State.

Based in Virginia and employing 2,200 staff, DigitalNet recorded sales of £162.4m last year. BAE generates £2.78bn a year from the sale of technology to the US Government and commercial customers.

Its North American Unit, which employs 26,000 staff, accounts for more than 20 per cent of group revenues and profits.

Published: 14/09/2004