BAE Systems PLC (LON:BA.) shares rose on Monday has agreed to spend US$2.2bn on military GPS business and an airborne radios unit being sold off as part of the merger of US defence giants Raytheon Co (NYSE:RTN) and United Technologies Corp (NYSE:UTX).
The FTSE 100 group said it had agreed to buy Collins Aerospace’s military GPS arm for US$1.93bn cash from United Technologies.
It has also struck a deal to acquire Raytheon's airborne tactical radios business for US$275m cash.
BAE, which is buying the Collins assets with external debt and those from Raytheon using existing cash, said that as they were asset purchases, they were expected to bring a tax benefit of around US$365mln and US$50mln respectively.
Charles Woodburn, BAE’s chief executive, said: “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.”
Both purchases, which are subject to the successful closure of Raytheon’s merger with United Technologies Corporation, will then be integrated into BAE’s existing US-based Electronic Systems arm.
In morning trading, BAE shares were 2.7% higher at 641.40p.
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