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BAE Jumps on Possible $40 Billion Saudi Fighter Deal

Shares in Britain's BAE Systems climbed as much as 4.4% 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.

However, one source familiar with the situation told Reuters that the timing of the deal, which was first outlined in a preliminary agreement in December 2005, 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," the source 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 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.

Shares in BAE, Europe's biggest defense firm, were up 2.3%, the second-biggest rise on the U.K.'s benchmark FTSE-100 index and valuing the maker of fighter jets, armored vehicles and nuclear-power submarines at about 16.2 billion pounds.

"Negotiations regarding the potential procurement of Typhoon for the Royal Saudi Air Force are between the governments of the United Kingdom and Saudi Arabia and BAE Systems is unable to make any comment as to their content or timing," a BAE spokesman said.

In June, the U.S. Department of Justice also launched an investigation into BAE over its compliance with anti-bribery laws, including its dealings with Saudi Arabia.

British media reports have accused BAE of paying 1 billion pounds over a decade to Saudi Prince Bandar bin Sultan in connection with a previous fighter plane deal.

Bandar, a former Saudi ambassador to the United States, has denied the sums involved represented secret commissions to him. BAE has also denied making any wrongful payments in its dealings with Saudi Arabia.

Eurofighter jets are built by a consortium of European defense companies in Britain, Germany, Italy and Spain. Eurofighter is owned by EADS, BAE and Finmeccanica.