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BAE Systems has agreed to buy the aerospace business of conglomerate Ball Corp in a $5.6bn deal, as Britain’s largest defence company expands further into the US.
The FTSE 100 company is paying cash for the Colorado-based business, which produces sensors used by the military and space industry.
The acquisition comes less than a month after BAE lifted its annual profit forecast as the war in Ukraine helped drive orders to new records. BAE builds Eurofighter Typhoon jets, nuclear submarines and combat vehicles and makes ammunition for the British military.
Ball’s aerospace business is expected to add about $2.2bn in revenues and make about $310mn in profits this year, BAE said on Thursday. It employs more than 5,000 people.
BAE shares dropped more than 3.5 per cent after the news.
BAE chief executive Charles Woodburn said the acquisition had a compelling “strategic and financial rationale”.
Rising profits and a record order book have driven shares in BAE up more than 80 per cent since the start of last year, making it the second-best performer on the FTSE 100 over the period.
BAE said it expected the Ball acquisition to generate cost savings of about £30mn a year, including from joint procurement.
Ball, which also has a packaging business and manufactures cans, said it would use proceeds from the sale to cut debt and planned to return money to shareholders through buybacks and dividends.
Daniel Fisher, Ball’s chair and chief executive, said BAE “is well-positioned to invest in Ball Aerospace to elevate the combined business to new heights”.
Alongside revealing a record order book this month, BAE said it now expected to generate more than £1.8bn in free cash flow, about £600mn higher than previously forecast.
The deal is expected to complete in the first half of 2024.
