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BAE Systems on Acquisition Trail for Electronics Businesses

$2.2 Billion for GPS and Airborne Tactical Radio Assets from Collins and Raytheon

BAE Systems has entered into definitive asset purchase agreements for Collins Aerospace’s Military Global Positioning System business and Raytheon’s Airborne Tactical Radios business, the company announced on 20 January. Subject to customary closing adjustments, as well as successful closure of the Raytheon-UTC merger, the cash settlements are expected to be $1.925 billion (€1.73 billion) and $275 million respectively.

These assets have come to market as part of the regulatory process relating to the merger of Raytheon and UTC. Both businesses are highly complementary to the BAE Systems US-based Electronic Systems business: on completion they would be integrated into the Electronic Systems division. Both businesses have strong growth outlooks, driven by close alignment with the priorities outlined in the US National Defense Strategy, Congressional mandates to upgrade existing capabilities and a presence on a substantial installed base of products and platforms in the US and with allied nations. Both transactions would be expected to be immediately earnings and cash accretive.

These proposed acquisitions present a unique opportunity to add high quality, technology-focused businesses to our Electronics Systems sector. It’s rare that two businesses of this quality, with such strong growth prospects and close fit to our portfolio, become available. The strategic and financial rationale is strong and these proposed acquisitions, which are focused on areas of highest priority defence spending, will further enhance the Group’s opportunity for continued growth in Electronic Systems,” commented BAE Systems’ Chief Executive, Charles Woodburn.

Collins Aerospace’s GPS business centres on its global position, established over 40 years, as a leading provider of mission-critical military GPS receiver solutions, with an Installed base of over 280 different platforms across ground, air and individual weapon systems.

Driven by the secure geo-positioning needs of the modern battlespace, the company expects the business to see continuing strong customer demand for its product portfolio, as precision munitions are expected to play an increasingly critical role in military operations. With the US Congress having mandated the use of M-Code for all military GPS user equipment after October 2020, this business is well positioned to address the market represented by the 700+ platforms expected to migrate to this standard.

Raytheon’s Airborne Tactical Radios business designs, manufactures and supplies a broad range of mission-critical communication systems to the US Department of Defense, allied governments and large military aircraft manufacturers. The business has a long history of innovation, which has resulted in development of valuable intellectual property to support its secure communications, leading to a significant installed base of radios across a number of allied countries. These systems feature robust anti-jamming, multi-band, multi-channel and encryption capabilities. It is differentiated by its industry-leading and battle-proven performance in challenging environments.

The business is a strong strategic fit with BAE Systems’ existing portfolio, adding complementary positions in the airborne communications domain including software-defined radio capabilities and a catalogue of waveforms. The acquisition brings with it a certified indigenous encryption capability, an essential part of secure communication.

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