The two groups will bring their activities in training, electronics and IT systems engineering in Saudia Arabia into a single holding company which will be majority owned by BAE.

"This enhancement of our relationship with our valued partner demonstrates the continued commitment to increase Saudi participation in our business in support of stated Saudi national priorities," BAE's Chief Executive Ian King said in a statement on Monday.

BAE Systems said there would not be any material near-term impact on underlying earnings from the reorganisation.

(Reporting by Sarah Young; editing by Kate Holton)