BAE strikes $5.6bn aerospace deal

November 2023 | DEALFRONT | MERGERS & ACQUISITIONS

Financier Worldwide Magazine

November 2023 Issue

Ball Corporation agreed to sell a number of its aerospace assets to BAE Systems in a deal worth $5.55bn.

The acquisition, which is subject to customary regulatory approvals and conditions, with a targeted completion date in the first half of 2024, will be funded by a combination of new external debt and existing cash resources. The agreement includes a termination fee of $100m payable by BAE Systems 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.

Ball’s aerospace operations manufacture spacecraft, instruments and sensors for defence and civil satellites that are used, among other things, to track space objects and monitor weather and climate change. Ball is a specialist supplier of satellite systems, geospatial intelligence, tactical solutions and antennae arrays.

The deal, described by BAE as a “unique opportunity to strengthen BAE Systems’ world class multi-domain portfolio”, is the biggest acquisition this year by a British company.

Ball put the business up for sale in June 2023 as it seeks to focus on packaging and to reduce its $9.7bn debt pile, which is partly a legacy of its £4.5bn takeover of Rexam in June 2016.

BAE beat a number of other interested parties to secure the deal for Ball. Several private equity firms, including Blackstone and Veritas Capital, were in the running, as were other defence contractors including General Dynamics and Textron.

“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,” said Charles Woodburn, chief executive of BAE Systems. “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.”

“Since 1956, generations of dedicated Ball Aerospace colleagues have transformed a business of humble beginnings into a thriving enterprise offering innovative capabilities in a world that needs rapid, scalable technology solutions,” said Daniel W. Fisher, chairman and chief executive of Ball. “In recent years, the business has positioned itself to have an even greater contribution to customers’ missions and delivered fourfold growth and record levels of combined contracted and won-not-booked backlog. The complementary cultural fit of Ball Aerospace and BAE Systems and their combined position as a pure play aerospace and technologies company will leverage Ball’s recent investments in talent and facilities located across the country and centered in Boulder, Broomfield and Westminster, Colorado, to provide a multi-dimensional platform for vital national defense, intelligence, and science hardware, software, and space-based assets.

“BAE Systems is well-positioned to invest in Ball Aerospace to elevate the combined business to new heights, generate significant value to critical mission partners, offer customers more affordable solutions and enable a safer world for all stakeholders benefitting from today’s agreement,” he added.

BAE expects Ball Aerospace to grow its sales by 10 percent a year over the next five years and it also expects to add to BAE’s profits during the first year following the deal. Ball has already doubled its sales during the last five years and BAE expects those sales – which were $1.98bn in 2022 – to reach $4bn by the end of the decade.

BAE expects to generate around $30m of cost savings in areas such as joint procurement and better management of projects, but has not yet made any reference to job cuts.

Richard Summerfield