BAE Systems plc – Proposed acquisition of Ball Aerospace

August 17, 2023 - BAE Systems plc (“BAE Systems” or the “Company”) announces that it has entered into a definitive Stock Purchase Agreement to acquire the Ball Aerospace business from Ball Corporation for c.$5.55bn in cash, subject to customary closing adjustments. The proposed stock transaction will be treated as an asset purchase for federal tax purposes, with an expected net present value tax benefit of c.$750m making the underlying economic consideration for the business c.$4.8bn.

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 result.

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 Colorado, with more than 5,200 employees, of whom over 60% hold US security clearances.

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 $1bn in world class facilities and capabilities which, combined with its highly skilled workforce, positions the business to deliver continued growth for years to come.

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 $2bn in annual revenues in the growing space domain, C4ISR and missile and munitions markets. The acquisition will provide our US business with a position in some of the fastest growing segments of the defence market and further increases our alignment to enduring customer priorities embodied in the US National Defense Strategy.

The growth outlook, anticipated at a c.10% CAGR over the next five years will build on our US business’ existing strong portfolio by expanding our footprint in space by an order of magnitude, offering a complementary set of customer relationships in the national security space community, and providing new access to civil space markets. In addition, Ball’s expertise in spacecraft, mission payloads, optical systems, sensors, scientific and tactical systems, analytical tools, and world class antenna systems support a broad set of products and differentiated technologies to address the growing space, C4ISR and missile and munitions markets.

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.$30m p.a run rate, with savings resulting from improved competitive positioning,  procurement savings, and improved programme execution and management of bids to delivery, all contributing to margin expansion.

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 $2.2bn and adjusted EBITDA of approximately $310m in 2023 and has strong growth potential with an expected revenue CAGR of c.10% over the next five years, with continued growth expected thereafter. EBIT margins are expected to be around 12% post cost synergies over the medium term. It is an acquisition that aligns with and enhances our value compounding model of good sustained organic growth, margin expansion and strong cash generation.

The net acquisition price of c.$4.8bn represents a transaction multiple of ~ 13x estimated 2024 EBITDA net of the tax benefit and net of run-rate cost synergies.  The proposed acquisition is expected to be earnings accretive in the first full year including run-rate cost synergies, cashflow accretive in the first year excluding synergies and is expected to achieve a return on invested capital in excess of cost of capital within five years post completion.

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 US$100 million payable by BAE Systems, Inc. to Ball Aerospace’s parent company in the event the transaction is terminated because certain required regulatory conditions are not met within the agreed timeframe.

Listing Rules Disclosures

The proposed acquisition constitutes a Class 2 transaction for the purposes of the UK Financial Conduct Authority's Listing Rules. During the full year ended 31 December 2022, the Ball Aerospace business generated revenue of $1,977m and EBIT of $170m, and the business had gross assets of $1,152m.

Analyst and investor presentation

A presentation, for analysts and investors, will be available via WebEx at 9:00 am UK time today (17 August 2023). Details can be found on, together with presentation slides and this announcement.  A recording of the presentation will be available for replay later in the day.

The conference call registration link is detailed below:

Martin Cooper
Investor Relations Director
Investor Relations Director
+44 (0)1252 383040

Kristina Anderson
Director, Media Relations
Corporate Communications
+44 (0) 7540 628673

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