PARIS -- Alcatel is expected to purchase a larger share of Thales, a manufacturer of defense electronics, when its board meets later this week.

Another player on the scene is EADS, which is reportedly offering its satellite production to Thales in exchange for a stake in the company.

EADS is the parent of Airbus, the European aerospace consortium. Thales is the largest producer of defense electronics in Europe.

The French government must approve any deal but is not expected to comment until a formal agreement is in place.

Alcatel, which also makes top-secret military satellites, currently owns a little less than 10% of Thales. The company has long sought to raise its stake in Thales to 25 to 30%.

Any such move would require approval of Italy-based Finmeccanica, its space industry partner, and the French government, which owns a 31% stake in Thales.

Alcatel has been active in merger talks of late. The telecom giant is also in talks to merge or acquire Lucent Technologies.

Analysts estimate it would cost Alcatel some 2 billion euros to raise its Thales stake to 30%.

It is also possible that EADS would transfer its Astrium satellite production unit to Thales. EADS, which is controlled by German and French interests, tried to gain control of Thales in 2004. Doing so would consolidate the European satellite industry under Thales.

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