British arms, security, and aerospace firm BAE Systems Plc (BA.L) announced Thursday its agreement to acquire Ball Aerospace business from Ball Corp. (BALL) for around $5.55 billion in cash, subject to customary closing adjustments.
The proposed acquisition is expected to be earnings accretive in the first full year including run-rate cost synergies, and cashflow accretive in the first year excluding synergies. It is also expected to achieve a return on invested capital in excess of cost of capital within five years post completion.
The deal is expected to close in the first half of 2024, subject to customary regulatory approvals and conditions. The definitive stock purchase agreement includes a termination fee of $100 million payable by BAE Systems to Ball Aerospace's parent company.
The acquisition will be treated as an asset purchase for federal tax purposes, with an expected net present value tax benefit of around $750 million. The underlying economic consideration for the business would be around $4.8 billion.
The proposed acquisition will be funded by a combination of new external debt and existing cash resources.
Ball Aerospace is a provider of spacecraft, mission payloads, optical systems, and antenna systems to Intelligence Community, US Department of Defense, and civilian space agencies. The Colorado -based business has more than 5,200 employees, of whom over 60% hold US security clearances.
In Fiscal 2022, Ball Aerospace business generated revenue of $1.98 billion and EBIT of $170 million, and the business had gross assets of $1.15 billion. The business is expected to achieve revenues of approximately $2.2 billion and adjusted EBITDA of approximately $310 million in 2023.
BAE Systems said the Ball Aerospace portfolio is highly complementary and offers a number of adjacencies to its US-based business, mainly across multiple Electronic Systems businesses. On completion, the company expects to report Ball Aerospace as part of that sector.
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