People gather at the BAE Systems booth during the Association of the United States Army (AUSA) Global Force Symposium & Exposition in Huntsville, Alabama, U.S. March 28, 2023. REUTERS/Cheney Orr/File Photo Acquire License Rights
- BAE is funding the deal with new debt and existing cash
- BAE shares fall 3% on early deals
- Ball Corp plans to use proceeds to reduce debt and focus on packaging
- According to analysts at Jefferies, the deal is a little pricey, but it’s a good fit
Aug 17 (Reuters) – Britain’s BAE Systems (BAES.L) on Thursday agreed to buy Ball Corp’s (BALL.N) aerospace assets for around $5.55 billion in cash and itself thereby securing a key US contractor in areas such as national security and intelligence.
Reuters reported in July that private equity firms Blackstone Inc (BX.N) and Veritas Capital Fund Management were working with defense firms including BAE, General Dynamics Corp (GD.N) and Textron (TXT.N) to buy the company competed.
Ball Corp, the world’s largest supplier of beer cans, said it will use the proceeds to pay down its $9.7 billion debt burden, return money to shareholders and accelerate organic growth at its global packaging operations.
BAE, Britain’s largest defense company, plans to take on new debt and use cash to buy Ball’s aerospace division, which builds spacecraft, instruments and sensors used to monitor weather and climate change, among other things.
BAE Systems shares fell 3% by 07:30 GMT.
“We believe this deal is a good fit, albeit a little pricey,” Jefferies analysts led by Chloe Lemarie wrote in a note.
The deal, which is expected to close in the first half of 2024, would boost earnings per share and margins in the first year after closing.
BAE has benefited from increased military spending. This month, the company raised its earnings forecast for 2023, saying rising global uncertainty has pushed military equipment orders to record levels.
“It is rare that a company of this quality, scale and complementary capabilities, with strong growth prospects and a good fit with our strategy, becomes available,” said Charles Woodburn, BAE CEO, in a statement.
“The strategic and financial rationale is compelling as we continue to focus on areas of priority defense and intelligence spending.”
“Confirmation of the buyback is therefore important support,” analysts said as BAE confirmed the £1.5 billion ($1.91 billion) share buyback announced with its half-year results on Thursday.
The Colorado-based aerospace company, which provides aerospace and national defense hardware such as sensors and antennas, had sales of $1.98 billion and accounted for 13% of Ball’s consolidated net sales in 2022.
The proposed deal would be treated as an asset purchase for federal tax purposes, BAE said.
Morgan Stanley is acting as financial advisor to Ball Corp.
($1 = 0.7856 pounds)
Reporting by Yadarisa Shabong in Bengaluru; Edited by Subhranshu Sahu and Jason Neely
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