Bulletproof clothing manufacturer Armor Holdings Inc is to acquire body armour supplier Speciality Group Inc for $92 million.

The transaction, which is subject to the approval of Specialty Defense's shareholders and federal anti-trust clearance, is expected to close in the fourth quarter of 2004.

Robert Schiller, president and chief operating officer of Armor Holdings said the acquisition would help the firm emerge as one of the Department of Defense's largest suppliers of soldier equipment.

Specialty Group owns and operates five manufacturing facilities in Pennsylvania, Kentucky and Tennessee, and expects to generate approximately $60 million in revenues for its fiscal year ending 30 September 2004.

The company currently has funded backlog of approximately $95 million, excluding executable options on existing contracts of approximately $137 million.

Armor Holdings says it intends to leverage Specialty Group's US based high volume manufacturing capacity to compete aggressively in the recently announced multi-year solicitation for up to 360,000 vests.

"We also expect to integrate our significant research, development and engineering expertise into Specialty Group's existing programs, and to realise additional strategic and operational benefits from this combination," Schiller added.