Britain's BAE Systems announced a $3.97 billion take-over of US armoured car maker United Defence Industries on Monday, expanding its lead over European rivals in the US market. BAE said it would pay $75 a share for the maker of the Bradley Fighting Vehicle, a premium of 29 percent over United Defence's close of $58.26 on Friday.
The move puts BAE in line for lucrative repair and overhaul work on Bradley vehicles involved in operations in Iraq and Afghanistan.
It also gains a company set to play a key role in the $100 billion Future Combat Systems programme which will provide the US Army with a new generation of armoured vehicles.
Chief Executive Mike Turner told reporters on a conference call the deal underscored BAE's trans-Atlantic strategy.
"We are very comfortable with the price we have paid, we think it's a fair price," Turner said.
BAE Group Finance Director George Rose said that North America generated 25 percent of BAE's profits last year, but would have contributed about a third on a proforma basis if United Defence was included.
"We do see this as a big improvement in the risk profile and the quality of the profits of the group," he said on the conference call.
With United Defence, BAE moves closer to top-ranked General Dynamics in the land systems sector, having bolstered its role with its purchase of UK-based Alvis last year.
Turner said BAE had won out over "a number" of other firms seeking to buy United Defence: "It was a competitive process. We had a busy weekend."
The interest shown reflects the importance of armoured vehicles in recent conflicts BAE said in a statement: "As a result of the global war on terror and ongoing operations in Iraq and Afghanistan, the US Department of Defence has significantly shifted its priorities and budget towards land systems."
President George W. Bush's supplemental budget request submitted to Congress last month called for $5.4 billion to refit or repair equipment being used in Iraq and Afghanistan, including Bradleys seeing five times their usual rate of use.
More than 7,000 Bradley vehicles have been produced and the vehicle is expected to remain in the US Army fleet until 2030.
BAE said it expected the deal to close in mid-2005 and immediately boost earnings, with a step up expected in the first full year following completion. It said it would finance the deal with a new $3 billion debt facility and a placing of around 375 million pounds ($715 million) in shares.
Comments
Comments are closed.