Sept. 17 (Bloomberg) -- Saudi Arabia ordered 72 Eurofighter Typhoon warplanes from the U.K. at a cost of 4.43 billion pounds ($8.86 billion), the biggest export contract for the aircraft.

The deal comes 12 weeks after the U.S. Justice Department began an investigation into alleged corruption tied to Saudi weapons purchases from BAE Systems Plc, which will assemble the Eurofighters at its plant in Warton, northwest England. The price is similar to that paid for aircraft sold to Britain's Royal Air Force, the Saudi Ministry of Defense and Aviation said.

The 1,500-mile-an-hour Eurofighter is Europe's largest military project and the Saudi contract will help safeguard 100,000 jobs and boost revenue at London-based BAE and partners European Aeronautic, Defence & Space Co. and Finmeccanica SpA. BAE's earnings will be substantially higher than estimated following the deal, Credit Suisse analyst Steve East said.

``This is a very significant win for BAE,'' said London- based East, who has an ``outperform'' rating on the stock. ``The service and spares contracts, Hawk training aircraft and missile systems that we expect to be ordered with these planes should represent incremental volumes and profits.'' Support contracts may span 30 years in total, the analyst said.

The Saudi defense ministry announced the order in a statement on the official Saudi Press Agency Web site. The U.K. Ministry of Defence said the first 24 planes will come from an existing U.K. contract for 232 aircraft.

BAE regards the contract as an ``important milestone'' in developing Saudi Arabia as a home market, it said in a statement. The company employs about 4,600 people in the kingdom.

EADS Stake

EADS, with a 46 percent stake, is the largest shareholder in Eurofighter GmbH, which is based in Hallbergmoos, Germany. BAE has 33 percent and Italy's Finmeccanica SpA holds 21 percent through its Alenia Aeronautica subsidiary.

BAE shares fell 12.5 pence, or 2.6 percent, to 470.5 pence in London. The stock has added 11 percent this year, giving a market value of 16.5 billion pounds. EADS stock dropped 1.1 percent to 20.19 euros and Finmeccanica closed down 1.5 percent at 20.31 euros. Europe's Dow Jones Stoxx 600 Index fell 1.5 percent.

Saudi Arabia, the Middle East's largest economy, is using higher oil revenues to modernize its military. The country agreed with the U.K. government in 2005 that defense improvements are necessary to promote regional stability and fight terrorism.

That accord said BAE would invest in Saudi companies, train thousands of Saudi pilots and military personnel, and maintain and repair equipment. The transaction agreed today will be known as ``Project Salam,'' the U.K. MoD said.

Long Relationship

``It's a relationship that goes back to the 1960s,'' Anthony Harris, a former U.K. ambassador to the United Arab Emirates, said in a telephone interview. ``There is a huge tradition of British training and it would have been a tragedy if that had come to an end. I think its excellent news for Saudi-British relations.''

BAE has provided Tornado fighter jets, Hawk trainers, components and air-base management to Saudi Arabia since 1985.

``I would imagine the Saudis would probably retire the Tornados from front-line service and a lot of the pilots will want to go on to the Typhoons,'' said Harris, who has also served as a diplomat in Saudi Arabia.

U.K. Probe

The first Middle East order for the Eurofighter comes nine months after the U.K. Serious Fraud Office dropped a probe of BAE sales in Saudi Arabia, citing national security concerns.

The Guardian newspaper and British Broadcasting Corp. reported in June that BAE made secret payments of 1 billion pounds to Prince Bandar bin Sultan of Saudi Arabia, citing the U.K. investigation. BAE denied wrongdoing and Bandar called the reports ``false.'' Prince Bandar was ambassador to the U.S for 20 years.

While the U.S. Department of Justice is continuing its investigations, Credit Suisse's East said the chief concern had been that Saudi Arabia might postpone or walk away from the Eurofighter purchase and that today's order means that the probe is ``virtually irrelevant.'' He said the worst BAE now faces is a fine of $100 million to $200 million if found guilty of wrongdoing, a conclusion he said is unlikely.

The Eurofighter program, conceived 20 years ago during the Cold War for air defense against Soviet MiG warplanes, is jointly owned by the U.K., Germany, Italy and Spain. The four countries are scheduled to buy a total of 620 aircraft, led by Britain's order for 232.

The first aircraft went into production in 1998 with manufacturing at four plants in the partner countries. Deliveries began in 2003 and are expected to extend until 2014.

Engine Suppliers

BAE makes the front and rear fuselages of the plane. Engines are supplied by Eurojet Turbo GmbH, a venture of U.K.-based Rolls-Royce Group Plc, MTU Aero Engines Holding AG, Carlyle Group Inc.'s Avio SpA and Spain's Industria de Turbo Propulsores.

Eurofighter is also competing for export orders in India, Greece, Japan, Turkey and South Korea. Its first export order came from Austria for 15 jets. A total of 127 Eurofighters have been delivered so far, the company said in July.

BAE appointed Harry Woolf, former chief judge of England and Wales, on June 15 to lead a panel that will investigate BAE's ethical standards after the allegations of secret payments. While the panel will examine ``policies and processes,'' it won't look into Saudi arms sales because they have been ``exhaustively'' investigated, BAE Chairman Dick Olver said at the time.

Probe Dropped

Britain dropped its probe in December after a review by Attorney General Peter Goldsmith and intervention by Tony Blair, then prime minister. The probe threatened to have ``devastating'' consequences for relations with Saudi Arabia and for national security, Blair said a month later.

``Had we proceeded with this investigation it would have significantly damaged our relationship with Saudi Arabia and that relationship is of vital importance, including fighting terrorism in this country,'' Blair said.

In March, the Organization for Economic Cooperation and Development criticized the decision to drop the probe. ``There are investigations but no prosecutions,'' Mark Pieth, a spokesman for the organization, said on March 14.

To contact the reporter on this story: Emmet Oliver in London at eoliver4@bloomberg.net; Massoud A. Derhally in Dubai at mderhally@bloomberg.net.

Last Updated: September 17, 2007 13:08 EDT