"The UK Government has signed a Memorandum of Intent with the Kingdom of Saudi Arabia to aim to finalise discussions for the purchase of 48 Typhoon Aircraft," BAE said in a brief statement to the London Stock Exchange.
"This is a positive step towards agreeing a contract for our valued partner.
"We are committed to supporting the Kingdom as it modernises the Saudi Armed Forces and develops key industrial capabilities."
In reaction, BAE's share price jumped 2.0 per cent to 600.80 pence in afternoon deals on London's benchmark FTSE 100 index, which traded flat.
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