BAE shoots for the stars with £4bn space deal: UK defence giant to buy America’s Ball Aerospace

BAE Systems took a giant leap into the space sector yesterday with a £4.4billion deal to buy America’s Ball Aerospace – the biggest overseas takeover by a British firm this year.

It gives the UK’s largest defence company a growing slice of an industry that is expected to become an ‘increasingly important domain of future warfare’, says BAE boss Charles Woodburn.

Based in Colorado, 67-year-old Ball Aerospace is being hived off by parent conglomerate Ball Corporation, the world’s biggest supplier of beer cans.

BAE reportedly fought off competition from private equity firms such as Blackstone and US defence operators including General Dynamics to scoop the deal.

It bucks the trend for cutting-edge British firms, such as Cobham and Meggitt, falling prey to overseas takeovers in recent years.

Forecaster: A weather satellite designed by US firm Ball Aerospace. BAE Systems has agreed to buy the US space technology group in a £4.4bn deal

Shares in BAE fell 4.7 per cent, or 46.7p, to 955.8p, on fears it paid too much but Woodburn said it was a ‘very attractive price’.

It is using existing cash and new debt to fund the acquisition, flexing its growing financial muscle in the wake of Russia’s invasion of Ukraine last year.

‘It’s rare that a business of this quality, scale and strategic fit becomes available and we’ve leveraged our financial strength and momentum to take advantage of this opportunity,’ Woodburn said.

‘Ball is a big deal for us. It’s a business we’ve long coveted and looked at from the outside.We were pleased it came up for sale at a time that we were in a position to be able to move on that.’

Ball Aerospace builds satellites as well as instruments and sensors for satellites used by military forces to track enemy movements and by scientists to monitor the weather and climate change.

It also supplies parts to the James Webb space telescope and for F-35 fighter jets, used by US, as well as UK, armed forces.

The deal is expected to complete next year, pending approval by regulators.

Tom Arseneault, head of BAE’s US division, said it could take advantage of the ‘steady inexorable shift of priority to the space domain where scores of new satellites will orbit earth to protect and defend freedoms around the world’. 

That includes forces looking to monitor missile launches and track hypersonic weapons.

Concerns about climate change were also ‘steering budgets to space, where future generations of sophisticated scientific instruments and monitoring systems will help us better understand the earth and our impact on it,’ he added. 

And demand for satellites is being lifted by the roll-out of networks of smaller satellites for communications.

Meanwhile, war in Ukraine has boosted demand for Ball’s munitions business, as its customers include America’s defence department. 

Woodburn said the war had shown how the use of satellites for intelligence and surveillance was ‘incredibly important’.

He said: ‘We see space as becoming an increasingly important domain of future warfare and this acquisition accelerates our position into one of the fastest growing areas of defence spending.’

BAE already supplies electronic components for space missions such as the Mars Rover. 

But space forms less than 5 per cent of overall business for a company that made £23.3billion in revenues last year.

Buying Ball, which made 70 per cent of its £1.55billion sales last year in the space sector, will boost that.

Shares up since war in Ukraine 

BAE’s bold swoop has been enabled by its improved prospects after Vladimir Putin launched a war against Ukraine last year.

Shares have risen 74 per cent since the start of 2022, bolstered by the prospect of higher defence spending. 

Demand for weapons, ammunition and equipment has soared as Ukraine’s allies replace stocks they have contributed to aid the country’s defence.

BAE’s order book has hit a record £66billion, prompting it to upgrade its earnings guidance for 2023.

It is pencilling in a rise of 10 per cent to 12 per cent.

The company, which also makes submarines, fighter jets and warships and munitions, is worth £29billion. 

The £4.4billion valuation of Ball Aerospace puts it at a substantial 15 per cent of that. The takeover is BAE’s largest to date.

This post first appeared on Dailymail.co.uk