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Reuters had reported in July that private equity firms
Blackstone Inc and Veritas Capital Fund Management were
competing against defence companies such as BAE, General
Dynamics Corp and Textron to buy the business.
Ball Corp, the world's largest supplier of beer cans, said it
would use the proceeds to trim its $9.7 billion debt pile,
return money to shareholders and speed up organic growth across
its global packaging operations.
BAE, Britain's biggest defence company, plans to raise new debt
and use cash to buy Ball's aerospace operations, which build
spacecraft, instruments and sensors used among other things to
monitor weather and climate change.
Shares in BAE Systems were down 3% by 0730 GMT.
"We see this deal as a good fit, although slightly expensive,"
Jefferies analysts led by Chloe Lemarie wrote in a note.
The deal, which is expected to close in the first half of 2024,
would add to its earnings per share and margins in the first
year post completion.
BAE has benefited from increased military spending. This month
it upgraded its earnings guidance for 2023, saying increased
global uncertainty had driven military equipment orders to a
record level.
"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," BAE Chief
Executive Charles Woodburn said in a statement.
"The strategic and financial rationale is compelling, as we
continue to focus on areas of high priority defence and
Intelligence spending."
"Confirming the buyback is thus a key support," the analysts
said as BAE on Thursday confirmed the 1.5 billion pound ($1.91
billion) share repurchase announced with its half-year results.
The Colorado-based aerospace business, which provides aerospace
and national defence hardware such as sensors and antennas, made
$1.98 billion in revenue and accounted for 13% of Ball's
consolidated net sales in 2022.
The proposed deal would be treated as an asset purchase for
federal tax purposes, BAE said.
Morgan Stanley serves as Ball Corp's financial adviser.
($1 = 0.7856 pounds)
(Reporting by Yadarisa Shabong in Bengaluru; editing by
Subhranshu Sahu and Jason Neely)
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