Lockheed Martin

(LMT) - Get Report

said late Thursday that it would sell its

Sanders

aerospace electronics unit and two other divisions to a North American subsidiary of

BAE

, Europe's largest military contractor, for $1.67 billion in cash.

Bethesda, Md.-based Lockheed would retain $1.3 billion after taxes and other costs, and take a third quarter charge of $1 billion, or $2.50 a diluted share, for good will and intangibles, Lockheed said. The deal is expected to close by the end of the year, the companies said.

"This proposed transaction advances our strategic initiatives to refocus the corporation, generate cash and reduce debt,'' said Vance D. Coffman, Lockheed Martin's chairman and chief executive, in a statement. Lockheed, the biggest U.S. military contractor, said in September that it was selling eight businesses, including the Sanders unit, to pare down almost $12 billion in debt and increase profits.

BAE North America is buying not only Sanders but

Lockheed Martin Fairchild Systems

, in Syosset, N.Y., and Lockheed Martin's

Space & Communications

unit in Manassas, Va. No layoffs are expected, the company said.

Rockville, Md.-based BAE Systems North America is a subsidiary of BAE, which is seeking to increase its presence in the U.S. It has 18,300 employees in North America and Canada.

Shares of Lockheed fell 1/16 to 25 in after-hours trading, according to

Instinet

.