SPECULATION has been growing this week that BAE Systems could be the target for a takeover by Boeing.

Phil Condit, chief executive of Boeing, the world's largest aerospace group, said his company was considering BAE Systems for possible takeover.

BAE Systems, which employs 2,150 people at its Rochester site, announced 150 job losses this month due to a downturn in orders.

The avionics giant has been linked to a transatlantic merger with Boeing in the past and only in January the company officially denied reports that it had held exploratory talks with its American rival.

But never before has one of their executives been so clear about their ambitions. Mr Condit, on a European tour this week that includes talks with UK government defence and industry ministers, said that BAE was an "interesting merger opportunity".

He said: "We have a very good merger and acquisitions capability within Boeing and they are looking at opportunities in Europe."

Any merger would mean both companies would have unrivalled footholds in the two biggest defence markets of America and Europe.

Government rules prevent BAE from having a non-British chairman or chief executive and bar foreigners from owning 15 per cent of shares.

This means any deal would have to be presented as a merger rather than a takeover by the US company.

But a spokesman for BAE said the press speculation surrounding BAE's future was constant.

He said: "What Mr Condit said was that BAE was an interesting option - but not at this time.

"Our strategy has always been to be one of the two or three major players in the avionics and defence market. Whether we get there though a merger, by buying up other companies or just continuing to grow has not yet been decided."