Shares of Armor Holdings Inc. (NYSE: AH) jumped more than 5 percent in Monday trading after the company agreed to be acquired by BAE Systems for $4.1 billion.

BAE, Europe's largest military contractor said in a statement that it will pay $88 per share of Armor Holding's stock. Shares of Armor shot up $4.45, or 5.4 percent, to close at $86.60 on the New York Stock Exchange. Earlier, the shares hit an all-time high of $87.30.

The purchase price represents a 7 percent premium over its closing stock price on Friday.

We are exceptionally pleased to join forces with BAE Systems , said Warren Kanders, chairman and CEO of Armor.

The maker of military, law enforcement, and consumer security products has seen its sales increase after the U.S entered Iraq. Roadside bombs and snipers have forced Washington to buy more of Armor's protective gear.

Armor is also the largest maker of armor for Humvee transports . It is one of various companies that have been awarded the chance to develop blast-proof prototypes of the vehicle as part of government purchases that may be worth $8.4 billion over two years.

BAE said the purchase will increase its sales in the U.S. by more than $3 billion and immediately add to profit.

Armor Holdings is a strong business with an excellent track record and a highly regarded management team, said Mike Turner, BAE's CEO. The combination of Armor Holdings with BAE Systems’ existing land systems business will strengthen our capabilities to the benefit of the US and UK armed forces and their international allies.

The deal is the second largest for BAE, which bought U.S. armored vehicle maker United Defense Industries for $4.2 billion in 2005.

It is now the eighth largest maker of military equipment in the world.