BTR and Siebe, which makes control systems for cars and other industrial components, have agreed to join forces in a deal which they say will save them £250m a year.

The combined group will see its workforce of about 125,000 cut by 4% to achieve cost savings.

The new group, to be called BTR Siebe, will be the world's largest control systems group.

Siebe shareholders will hold 55% of the new group, while BTR shareholders will get 45%.

Lord Marshall, currently Siebe chairman, will become chairman of the new group, while Ian Strachan, the BTR chief executive, will be deputy chairman.

The new company will have "significant incremental growth through the cross-selling of a wide range of products and services to an enlarged customer base."

The merged company will consist of five divisions: intelligent automation, controls, power systems, industrial drives and equipment, and automotive.

The merger is expected to be completed by February 1999.

Firms 'complimentary'

The news pleased City traders. Siebe shares ended up 18.5p or 8.6% at 233.5 and BTR shares closed 30p higher at 125p.

Analysts said the merger would bring together two companies with complementary businesses, while also offering to pep up the performance of BTR's operations under the control of Siebe's highly-regarded management.

"We think it's an excellent deal... it pulls together two highly complementary companies," said Robert Speed, analyst at Henderson Crosthwaite.

BTR criticism

One of the UK's top 100 companies by market capitalisation, BTR has been criticised in recent years and has issued a series of profit warnings.

The departure of Managing Director Owen Green in 1993 after 18 years in charge saw the beginning of harder times because of rising raw materials prices and slowing European growth.

In 1996 BTR began a £5.8bn ($9.58bn) disposals programme, but it became an obvious takeover target in recent months as slowing global growth and strong sterling hit its earnings prospects.

At Friday's close BTR shares were worth 95p - just half their value five months ago.

Siebe profits up

The merger plans were announced as Siebe reported a healthy rise in interim profits despite difficult economic conditions.

In the six months to October 3, the group made a pre-tax profit of £245.6m on turnover of £1.93bn.

The company made £224m during the same period last year.