BAE Systems plc – Proposed acquisition of Ball Aerospace
- BAE Systems acquires Ball Aerospace for $5.55bn in cash, strengthening its multi-domain portfolio
- Expected revenue CAGR of 10% over the next five years
- Accretive to margins and earnings per share in the first year post completion
- Multiple of ~13x 2024E EBITDA net of tax benefit and run-rate cost synergies
- None.
Ball Aerospace is a unique opportunity to strengthen BAE Systems’ world class multi-domain portfolio
- Leading provider of mission critical space systems and defence technologies across air, land and sea domains
- Strong growth potential in areas aligned with the US Intelligence Community and Department of Defense’s highest priorities
- Attractive positioning and outlook across military and civil space, C4ISR and missile and munition markets
- Highly complementary fit adding material scale of high calibre space, optical and antenna solutions
- Excellent cultural fit with a long and distinguished track record of innovation and product development
- Substantial investment in world class facilities and capabilities in the last five years to support growth
- Substantial increase to our US classified revenues, offerings and embedded customer relationships
Value enhancing financial effects
-
Expected revenue CAGR of c.
10% over the next five years with scope to expand margins - Accretive to margins and earnings per share in the first year post completion including run-rate cost synergies
- Accretive to cash flow per share in the first year
- ROIC expected to exceed WACC within five years post completion
- Multiple of ~13x 2024E EBITDA net of the tax benefit and run-rate cost synergies
- Proposed acquisition to be funded by a combination of new external debt and existing cash resources
BAE Systems structurally compounding investment case
- Attractive and strengthened revenue outlook
- Improved margins and continued expansion potential
- Strong cash conversion
- Consistent with capital allocation policy and allows for continued share buyback activity as announced with the Half Year 2023 results
Commenting on today’s announcement, Charles Woodburn, Chief Executive of BAE Systems, said:
“The proposed acquisition of Ball Aerospace is a unique opportunity to add a high quality, fast growing technology focused business with significant capabilities to our core business that is performing strongly and well positioned for sustained growth. It’s rare that a business of this quality, scale and complementary capabilities, with strong growth prospects and a close fit to our strategy, becomes available.
“The strategic and financial rationale is compelling, as we continue to focus on areas of high priority defence and Intelligence spending, strengthening our world class multi-domain portfolio and enhancing our value compounding model of top line growth, margin expansion and high cash generation.
“We couldn’t be more pleased to have reached this agreement and we look forward to welcoming the employees of Ball Aerospace to BAE Systems as we work together to support our customers and create value for shareholders.”
Ball Aerospace is a Space and Defence technology leader
Ball Aerospace is a leading provider of spacecraft, mission payloads, optical systems, and antenna systems with decades of proven success underpinned by world class advanced technologies. They have trusted customer relationships among the Intelligence Community, US Department of Defense, and civilian space agencies. The business has been a pioneer in its markets for many decades and is organised into four main divisions: National Defense, Tactical Solutions, Civil Space, and Advanced Technology and Information Solutions.
The business operates across a broad base of customers and platforms. It is well positioned in highly attractive markets, military and civil space, C4ISR, and missile and munitions. The space market exposure extends across positions in defence, intelligence, and scientific missions. The Tactical Solutions business is well positioned to capture expected increases in demand for missiles and munitions.
The business is headquartered in
Ball Aerospace has high revenue visibility and strong growth outlook
The business has a long and distinguished track record as a trusted partner and pioneering innovator. Over the last five years, Ball Aerospace has demonstrated its ability to convert its highly differentiated capabilities into a strong order backlog that has nearly doubled in size. It has invested around
The proposed acquisition represents an exceptional opportunity to strengthen our portfolio with significant scale and high end technology capabilities. Ball Aerospace will add more than
The growth outlook, anticipated at a c.
Highly complementary fit with BAE Systems portfolio and culture
The Ball Aerospace portfolio is highly complementary and offers a number of adjacencies to our US-based business, with particular opportunities to advance a number of franchise positions across multiple Electronic Systems businesses. On completion we expect to report Ball Aerospace as part of that sector.
We believe this proposed acquisition provides compelling value and an exciting future, underpinned by our companies’ shared culture of innovation and strong, mission-driven values. Our mission of We Protect Those Who Protect Us® resonates with the Ball Aerospace team, and our adjacent and augmented positions across the defence, intelligence, and scientific markets will strengthen our outlook and benefit BAE Systems, the Ball Aerospace business, and customers alike.
Strong synergy potential
With complementary adjacencies, Ball Aerospace and our US business will have expanded opportunities to create, develop, and manufacture solutions to some of our customers’ most challenging problems. It will position us to capture anticipated future market growth driven by modernisation and recapitalisation requirements. The differentiated products and capabilities in Ball Aerospace will also offer further acceleration of our pursuit of next-generation solutions across a number of our US businesses like Electronic Warfare and C4ISR as they address future customer demand.
In addition to these top line opportunities, we expect there to be cost synergies c.
The synergistic nature of the combined portfolio supports growth in adjacent areas for both our US business and Ball Aerospace, and adds further resilience to our existing franchises in the face of evolving customer needs and emerging technologies.
Value enhancement
The business is expected to achieve revenues of approximately
The net acquisition price of c.
The proposed acquisition will be funded by a combination of new external debt and existing cash resources.
Our capital allocation policy remains unchanged. We are committed to a strong investment grade credit rating and will continue the ongoing share buyback programmes including that announced with the 2023 H1 results.
Timetable and Regulatory
Completion is subject to customary regulatory approvals and conditions with a targeted completion date in the first half of 2024. The Agreement includes a termination fee of
Listing Rules Disclosures
The proposed acquisition constitutes a Class 2 transaction for the purposes of the
Analyst and investor presentation
A presentation, for analysts and investors, will be available via WebEx at 9:00 am
The conference call registration link is detailed below:
https://edge.media-server.com/mmc/p/925ertin
Cautionary statement:
All statements other than statements of historical fact included in this announcement including, without limitation, those regarding the financial condition, results, operations and businesses of BAE Systems and its strategy, plans and objectives and the markets and economies in which it operates, are forward-looking statements. Such forward-looking statements which reflect management’s assumptions made on the basis of information available to it at this time, involve known and unknown risks, uncertainties and other important factors which could cause the actual results, performance or achievements of BAE Systems or the markets and economies in which BAE Systems operates to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. BAE Systems plc and its directors accept no liability to third parties in respect of any such forward-looking statements.
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF THE MARKET ABUSE REGULATION (EU) NO 596/2014 AS IT FORMS PART OF
View source version on businesswire.com: https://www.businesswire.com/news/home/20230817941981/en/
Investors
Martin Cooper,
Investor Relations Director
Telephone: +44 (0)1252 383455
Email: investors@baesystems.com
Media Relations
Kristina Anderson,
Director, Media Relations
Telephone: +44 (0) 7540 628673
Email: kristina.anderson@baesystems.com
Source: BAE Systems plc
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