The only two Spanish encryption companies recognised by NATO could be combined, pending the outcome of ongoing negotiations.
Tecnobit, part of the Oesía Group, acknowledged on 9 October that it is in advanced negotiations with Duro Felguera to buy the latter's Epicom subsidiary.
A Tecnobit spokesperson said the deal would create "an opportunity for Spain" in the encryption market.
Epicom, which was set up in 1993, has been part of Duro Felguera since it was bought from electronics company Amper in 2013.
Epicom and Tecnobit already have a history of co-operation and both companies are integrated with the NATO classification system.
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