The investigation of allegations of corruption against UK firm BAE Systems by the US Department of Justice could stymie the company’s plans to expand into the America’s military hardware market.

Yesterday BAE Systems confirmed that it is facing allegations of making illegal payments in the 1980s in order to help it win plane and military equipment contracts from Saudi Arabia.

Today, UK newspaper the Guardian reported BAE’s shares had dropped 10% since news of the investigations were made public, despite a slight recovery later in the London markets.

An industry analyst told Jane’s Defence the investigation could jeopardise the completion of the acquisition of Amor Holdings.

The unnamed analyst said: “It is deemed in the US to be [a] politically sensitive issue when a company about to take over another company for $4.5bn is being investigated.

“It’s plausible that the deal could be deferred or even knocked on the head.”

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BAE’s US arms accounts of 36% of company sales, which is predicted to rise to 42% when the Amor deal is complete.