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  • Writer's pictureHank Klint

BAE Systems Acquires Aerospace Division of Ball Corp for Approximately $5.55 Billion

BAE Systems, the leading British defense company, has announced its agreement to acquire Ball Corp's aerospace assets for an approximate sum of $5.55 billion in cash.

This acquisition positions BAE as a significant player in critical sectors like national security and intelligence within the United States. Ball Corp, renowned as the world's largest beer can supplier, plans to utilize the proceeds from the sale to reduce its substantial debt of $9.7 billion, enhance shareholder returns, and accelerate growth across its global packaging operations.

BAE, recognizing the strategic value of Ball's aerospace operations, intends to finance the purchase through a combination of new debt issuance and cash reserves. Ball's aerospace segment specializes in crafting spacecraft, instruments, and sensors crucial for applications like weather monitoring and climate analysis.

However, the announcement of the deal had a negative impact on BAE's stock, causing a 3% decline in share prices.

Although analysts from Jefferies view the acquisition as a fitting addition to BAE's portfolio, they express reservations about the cost. The deal, anticipated to conclude in the first half of 2024, is predicted to contribute positively to BAE's earnings per share and margins within the first year following its completion.

BAE's recent success can be attributed to heightened global military expenditures, prompting the company to upgrade its 2023 earnings guidance. The surge in demand for military equipment has driven orders to an all-time high. BAE CEO Charles Woodburn highlights the significance of this acquisition, emphasizing the alignment of Ball Corp's capabilities with BAE's strategic focus on defense and intelligence priorities.

The purchase is further supported by BAE's commitment to shareholder value enhancement, as confirmed by the 1.5 billion pound ($1.91 billion) share repurchase announcement. Ball Corp's aerospace division, based in Colorado, contributes substantially to the company's overall performance, accounting for 13% of consolidated net sales and generating $1.98 billion in revenue in 2022.

The proposed transaction structure aligns with asset purchase guidelines for federal tax purposes. Financial advisory services for Ball Corp are provided by Morgan Stanley.

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