The company chairman, Lord Simpson, said that the company had been in "intense discussions for several months with a number of major participants in the global defence industry."

The end of the Cold War has led defence contractors to merge

European defence firms have been scrambling to link up since the end of the Cold War, but a proposed tie-up between British Aerospace, Germany's Daimler-Benz Aerospace, and France's Aerospatiale, has been held up by the French Government which has a stake in Aerospatiale.

GEC has been linked to British Aerospace, Thomson-CSF and various American defence contractors.

Earlier in the year, it used the proceeds of the flotation of GEC Alstom to buy a Texas-based defence electronics firm Tracor for $1.4bn (£800m), which is being merged with its GEC Marconi business.

With the defence industry consolidating rapidly, it is now more urgent than ever for GEC to find its strategic partner to make it a global player in defence electronics.

Healthy profits

The flotation also contributed to a huge boost to GEC's profits, which surged to £1.39bn for the half-year compared to £415m last time.

Underlying profits were also healthy, up to £358m compared to £295m last time. Turnover increased 9% from £3.1bn to £3.35bn.

Lord Simpson said: "GEC has reported a strong financial performance underpinned by continuing operating improvements from group companies despite uncertainty in some key markets."

The company also used part of its windfall profits to buy Siemens' 40% stake in telecoms company GPT for £610m, and to acquire an Israeil computer group which specialises in medical imaging technology.

The new telecoms group, now called Marconi Communications, produced a strong set of results. Profits increased to £105m on sales of £822m, an operating margin of 12.8%.

The company said the business would be "an engine for growth" with increased operating profits next year.