Thales, the French defence electronics group, has submitted an informal bid for Howaldtswerke Deutsche Werft (HDW) estimated to value the German submarine maker at about 500 million euros (540 million dollars), the Financial Times reported on Wednesday.

The bid by Thales will challenge another bid for HDW by the German heavy industry giant ThyssenKrupp.

And the timing of the bid is politically sensitive, with government officials suggesting it could even be on the agenda of an informal dinner between French President Jacques Chirac and German Chancellor Gerhard Schroeder in Dresden on Thursday, the newspaper said.

However, HDW's current owners, Chicago-based One Equity Partners (OEP), were unlikely to accept Thales' offer in its current form because they want to recoup their investment of about 800 million euros, FT reported, quoting sources close to the negotiations.

HDW was sold to OEP, the private equity unit of Bank One, last year, sparking an outcry at the time over the sell-out of German military technology.

But OEP misjudged HDW's potential for sales to Taiwan and is now looking to offload it, sparking interest from a number of potential buyers, ranging from ThyssenKrupp and Thales, to the French state-owned shipbuilding group Direction des Constructions Navales (DCN) and even US defence group Northrop Grumman.

FT quoted sources close to the negotiations as saying that Thales might invite possible partners to bid jointly and these could include Italian shipbuilder, Fincantierri, and DCN's Spanish partner Izar.

European politicians, alarmed at a possible sale of HDW to a non-European buyer such as Northrop Grumman, have now suggested that a pan-European solution be sought, a sort of maritime equivalent to the European Aeronautics Defence and Space Company (EADS).

HDW is best known for its fuel-cell powered technology that allows submarines to stay under water for two to three weeks without resurfacing.

 * Sounds like a technology that certain deputy-presidents could find useful.

Maybe it's not too late to substitute it as an offset opportunity now that Condomi AG's offset deal with the German Submarine Consortium (which includes HDW) to manufacture 100 million condoms per year in East London has gone soft. It be real.

With acknowledgement to AFP, Frankfurt.