BAE jumps on hopes for $40 billion Saudi fighter deal

By Mark Potter

LONDON (Reuters) - Shares in Britain's BAE Systems climbed as much as 4.4 percent on Friday after a newspaper reported it will clinch a 20 billion pound ($40.5 billion) deal to supply fighter jets to Saudi Arabia next week.

The Times, without citing sources, said the British government had sent the contract to supply 72 Eurofighter Typhoon jets to Saudi King Abdullah bin Abdul Aziz two days ago and that he was expected to sign it next week.

A government source told Reuters that a deal, which was first outlined in a preliminary agreement in December 2005, was likely sooner rather than later. But another person familiar with the situation said the timing was still fluid.

"It could happen in the next few weeks, we just don't know. It really is a case of when the Saudis decide to do something about it. It's speculation at the moment," that person said.

The deal became the focus of a political storm last year when the British government halted a probe of BAE by the country's Serious Fraud Office (SFO), after Saudi Arabia warned it might cancel the order if the investigation went ahead.

The investigation concerned allegations of corruption in a previous arms deal between Britain and Saudi Arabia involving BAE, that led to Britain's biggest ever export order, worth an estimated 43 billion pounds.

Britain's Ministry of Defence declined to comment on the possibility of a deal being signed next week.

"Negotiations are continuing and we expect them to conclude by the end of the year," a spokeswoman said.