Defence and aerospace group BAE Systems last night launched a multi-million takeover battle for tank maker Alvis.

BAE, which already owns a 29 per cent stake in Alvis, said it had agreed the terms of a £335m deal to buy the company.

The announcement puts it on a collision course with US group General Dynamics, which yesterday said it had received Department of Trade and Industry approval for its own £309m buyout.

Alvis Vickers employs 1,100 people at Newcastle, Telford, Leeds and Wolverhampton, but last night declined to say if workers would be affected by its sale.

Competition minister Gerry Sutcliffe said he had decided against asking the Competition Commission to investigate the proposed acquisition of Alvis by US defence group General Dynamics Corporation (GDC).

The Ministry of Defence (MoD) said the merger raised concerns about data confidentiality and maintenance of a UK capability to develop, operate and maintain military capability.

Vickers is the subject of a £309m takeover bid by GDC.

Mr Sutcliffe said he was proposing to accept undertakings from GDC designed to ensure protection of classified technology and information.

A spokesman for the Department of Trade and Industry (DTI) said the agreement effectively gave the MoD a veto over any proposal by GDC to close all or part of its UK operations.

"If the company (GDC) wanted to close down any part of its UK operation, it would have to notify the MoD to get its approval."