Freshfields Bruckhaus Deringer and Linklaters have landed the lead roles as defence contractors BAE Systems and VT Group merge their shipbuilding operations to create the UK's leading provider of surface warships.

Freshfields advised BAE on the establishment of the joint venture alongside the company's in-house team, with corporate partner Julian Long leading for Freshfields.

Magic circle rival Linklaters advised VT, with corporate partners Richard Godden and Shane Griffin playing key roles for the leading City law firm.

The deal sees BAE and VT join their surface warship-building and related support entities and marks Freshfields' biggest mandate for the defence and aerospace giant in recent years. BAE is known to hand much of its big-ticket work to Slaughter and May. Linklaters and Allen & Overy in the City and Cravath Swaine & Moore and Wilmer Cutler Pickering Hale & Dorr in the US have also enjoyed good relations with the client.

BAE had a change of legal director at the beginning of the year when O2 general counsel Philip Bramwell replaced Michael Lester in the role. At O2 Bramwell used Freshfields for major M&A work, including on the telecoms company's £17.6bn takeover by Spanish telecoms giant Telefonica.

The venture is expected to create net savings of £700m over the next 15 years. BAE will hold 55% of the merged entity, with VT able to sell its own stake in the joint venture for a minimum of £380m.

In a separate move, BAE, VT and the Ministry of Defence have agreed a £3.8bn order for two new aircraft carriers – HMS Queen Elizabeth and HMS Prince of Wales – which will become the largest ships in the Royal Navy. In-house lawyers Clifford Samuel and Andrew Gallagher advised BAE on the new ships.