BAE Systems PLC (LSE:BA.) has bought Ball Corp’s aerospace division for US$5.55 billion cash in a deal it described as “compelling”.
Ball, which is the world's largest supplier of beer cans, was reported earlier in the summer to be exploring a potential sale of its aerospace and defence business.
Charles Woodburn, chief executive said: "The proposed acquisition of Ball Aerospace is a unique opportunity to add a high quality, fast growing technology focused business with significant capabilities to our core business that is performing strongly and well positioned for sustained growth.”
BAE said the cash deal will be treated as an asset purchase for federal tax purposes, with an expected net present value tax benefit of around US$750 million making the underlying consideration around US$4.8 billion.
The net price represents a multiple of around 13x estimated 2024 earnings (EBITDA) and is expected to be earnings accretive in the first full year, cashflow accretive in the first year and is expected to achieve a return on invested capital in excess of cost of capital within five years post completion.
The proposed acquisition will be funded by a combination of new external debt and existing cash resources.
The acquired business is expected to achieve revenues of around US$2.2 billion and adjusted EBITDA of approximately US$310 million in 2023 and has strong growth potential with an expected revenue CAGR of c.10% over the next five years, with continued growth expected thereafter.
Cost synergies of around US$30 million are expected resulting from improved competitive positioning, procurement savings, and improved programme execution.
BAE said the deal was consistent with its capital allocation policy and allows for continued share buybacks.