20th Jan 2020 08:18
(Alliance News) - BAE Systems PLC said Monday it has made two acquisitions in the US, purchasing the military global positioning system from a United Technologies Corp unit and Raytheon Co's Airborne Tactical Radios business.
Shares in BAE Systems were up 2.9% in early trading in London on Monday at 642.60 pence - one of the best performer in the blue chip index.
The Farnborough-based aerospace firm is acquiring a military GPS business from Collins Aerospace - a unit of US aircraft manufacturer United Technologies - for USD1.93 billion in cash.
BAE is also buying US defence contractor Raytheon's Airborne Tactical Radios business for USD275 million in cash.
These deals are subject to the closure of the merger between Raytheon and United Technologies.
"The strategic and financial rationale is strong and these proposed acquisitions, which are focused on areas of highest priority defence spending, will further enhance the group's opportunity for continued growth in Electronic Systems. We look forward to welcoming the employees of the two businesses to the company, as we work together to help drive our business forward successfully," said BAE Chief Executive Charles Woodburn.
BAE said the GPS business acquisition from Collins Aerospace will be funded by new external debt.
"The proposed acquisition would be expected to be immediately earnings and cash flow accretive, and would be expected to achieve a return on invested capital in excess of cost of capital in the third full year post completion," BAE added.
The FTSE 100-listed firm noted the "highly complimentary" fit the military GPS business has with its own Electronic Systems unit.
The new military GPS business is expected to generate revenue of about USD359 million and adjusted earnings before interest, tax, depreciation and amortization of about USD127 million in 2020. In 2018, the business generate revenue of USD254 million and adjusted Ebitda of USD98 million.
BAE said the business has "strong future growth potential" and expects compound annual growth rate in excess of 10% over the next four years.
Turning to Raytheon's Radios business, BAE said the deal will be funded by existing cash.
The Radios business is expected to generate revenue of about USD125 million in 2019, with BAE believing it also has "strong growth potential", demonstrated by its US Department of Defense and NATO mandates for cryptographic and anti-jamming modernisation of software defined radios.
"The proposed acquisition is expected to be immediately earnings and cash flow accretive, and achieve a return on invested capital in excess of cost of capital in the first full year post completion," BAE added.
Shares in United Technologies closed 0.6% higher in New York on Friday. US markets will be closed on Monday for Martin Luther King Jr day.
By Paul McGowan; [email protected]
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