PARIS — France's arms procurement office and the state-backed bank Bpifrance announced that on May 2 they signed an agreement to set up this year a €50 million (U.S. $55 million) fund to invest in small firms seen to be of strategic defense importance.

"On May 2, Laurent Collet-Billon, head of the Direction Générale de l'Armement, and Nicolas Dufourcq, CEO of Bpifrance, signed an agreement which aims to create in 2017 a defense investment vehicle, initially with €50 million of funds," the DGA and Bpifrance said in a joint statement.

A key aim is to protect small French firms from a takeover by U.S. and Chinese companies seeking to acquire their sensitive know-how, according to a Nov. 23 report in business daily Les Echos.

The investment fund will inject equity or near-equity finance to boost the balance sheets of mainly small and medium companies, as well as startups owning products or technology deemed to be of strategic importance, the joint statement said.

Those firms might also be working on equipment aimed at export markets and boosting the competitiveness of French arms in foreign markets, the statement said. The companies would have sales in the tens of millions of euros. The fund could also help the companies as their financial needs evolve.

The government seeks to support innovation in the arms sector, increase its attractiveness for private sector investment, and a long-term strengthening of the defense industrial and technology base, the statement said.

"This is a significant undertaking for the sovereignty of our defense system, which relies on a strong and competitive industry," Collet-Billon said in the statement.

"This joint initiative will strengthen the activities of Bpifrance in strategic companies in the sector by adding its general intervention tools as well as specialist private funds which Bpifrance supports," Dufourcq said.

Bpifrance is a subsidiary of the state-owned Caisse de Depots et de l'Etat. Investing in companies is conducted by its unit, Bpifrance Investissement.

Defense Minister Jean-Yves Le Drian announced the plan to set up a specialist investment fund in November at the DGA innovation forum.