Ball Aerospace to Become Part of BAE Systems in $5.55 Billion Deal

On Thursday, Britain’s BAE Systems (BAES.L) agreed to buy Ball Corp’s (BALL.N) aerospace arm for about $5.55 billion in cash, snapping up a key U.S. contractor in national security and intelligence in its biggest deal ever. The purchase of Ball Aerospace will help BAE expand its presence in the United States, one of the world’s top defense markets, with a budget of more than $800 billion.

The company, whose businesses include defense, space, and nuclear, said the acquisition was expected to be earnings accretive in the first year, including run-rate cost synergies, and cashflow accretive in the first year excluding them. It was also expected to achieve a return on invested capital over the cost of capital within five years post-completion.

BAE said it would finance the acquisition with new external debt and existing cash resources. It expects the deal to close in the first half of 2024.

BAES Chief Executive Charles Woodburn said the acquisition was a “unique opportunity” to acquire a business with solid growth prospects and a good fit with its strategy. It will expand the company’s presence in the United States, one of the biggest defense markets and a critical element of its global expansion.

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Ball’s aerospace operations build spacecraft, instruments, and sensors for defense and civil satellites that are used, among other things, to track space objects and monitor weather and climate change. The Intelligence Community, U.S. Department of Defense, and civilian space agencies use its products. The company also makes components for the Hubble and James Webb space telescopes.

The company makes radar and surveillance equipment in the military sector to detect moving objects from a great distance. It is also a major supplier of systems the Royal Navy uses to operate its ships. In particular, it provides the Combat Management System, which integrates ship sensor and weapon systems through a single console.

Britain’s BAE Systems is a top supplier of military equipment to the U.S., where it is a critical player in developing the country’s cutting-edge F-35 fighter jets. The firm is also a leading developer of uncrewed aerial vehicles designed to fly and land independently without requiring pilots.

The deal is the latest sign of a pick-up in global defense spending as governments seek to counter growing threats from China and Russia. It comes a week after BAE upgraded its earnings outlook for 2023, saying the increase in global uncertainty had boosted military orders. The FTSE 100 firm also reported better-than-expected profit and margins in the year’s first half. Shares in BAE rose 2.7% in early trade on Thursday.