Babcock International provides support to the Navy's submarine fleet
Defence services company VT Group has agreed to a takeover deal worth £1.33bn ($1.9bn) from Babcock International.
The former Vosper Thornycroft, which had initially rejected Babcock's attention, said the cash-and-shares offer was "fair and reasonable".
The merged companies will form a support services powerhouse.
VT said Babcock's offer was good for VT shareholders, who will receive 361.6p in cash and 0.701 new Babcock shares for each VT share they hold.
Although VT had rejected Babcock's earlier approaches, it had faced increasing pressure from its shareholders to do a deal.
"The VT board believes that Babcock's offer represents an attractive proposition for VT shareholders," said VT chairman Mike Jeffries, announcing the deal.
He said it was attractive "both through the immediate offer premium and through the opportunity to benefit from the synergies available from combining our two businesses".
Babcock, which employs about 17,000 people worldwide, says it has identified roughly £50m in cost savings following the deal, through synergies in areas where the two companies overlap.
The merged group has been valued at about £2bn by analysts.
"The acquisition of such a high quality and complementary business is in line with our strategy to be the leading engineering support services company in the UK," said Mike Turner, chairman of Babcock.
VT was once a naval shipbuilder and is now a support services firm.
It had recently made a bid to buy UK infrastructure company Mouchel, but was forced to drop that when it was then the subject of Babcock's approaches.