BAE Spends $4 Billion To Acquire U.S. Counterpart United Defense Industries
Washington -- BAE Systems announced that its U.S. subsidiary, BAE Systems North America, has entered into a definitive merger agreement to acquire United Defense Industries, Inc. (UDI) for approximately $4 billion. The proposed acquisition is part of BAE Systems' current strategy to expand and develop its business in North America, create a global land systems business, and develop its worldwide through-life support and services capabilities.
UDI, headquartered in Arlington, VA, is a U.S. defense company that generated annual sales in 2004 of $2.3 billion. It designs, develops, and produces combat vehicles, artillery systems, naval guns, missile launchers, and precision munitions used by the U.S. Department of Defense and allies worldwide. It also provides non-nuclear ship repair, modernization, and conversion to the U.S. Navy and other U.S. Government agencies. UDI employs approximately 8,000 people in 25 locations in the U.S. and Sweden.
UDI, together with BAE Systems' existing UK and Swedish land systems businesses, will form part of a newly created global land systems business, which will be headquartered and led in the U.S. as part of BAE Systems North America by the UDI management team. As a result of the global war on terror and ongoing operations in Iraq and Afghanistan, the U.S. Department of Defense has significantly shifted its priorities and budget towards land systems
UDI is also well positioned to benefit from the shift in U.S. defense spending to prioritize the refurbishment and upgrade of existing systems until the next of generation of vehicles is deployed. UDI is responsible for the repair and upgrade of a large number of combat vehicles for the U.S. Armed Forces, including the Bradley program of more than 7,000 vehicles. The 2005 U.S. defense budget and supplemental request include approximately $1.3 billion for resets and upgrades to the Bradley vehicle fleet .
The combined land systems business will hold a significant position within the Future Combat Systems program, the U.S. Army's largest procurement program, and offers enhanced opportunities in relation to programs such as the UK's FRES and Sweden's SEP, and in the export market.
UDI's weapons systems positions and technological capabilities complement BAE Systems North America's advanced electronic systems and subsystems in areas such as targeting, communications, protection, and situational awareness. Additionally, the acquisition further develops BAE Systems' through-life support and services capabilities by adding to its operations the U.S. Navy's largest non-nuclear ship repair and overhaul business.
"The combination of UDI with our existing land systems and U.S. operations will create a world class business, better able to meet the ever more demanding requirements of our military customers with innovative capabilities, products, and solutions," Mark Ronald, president and CEO of BAE Systems North America, said. "BAE Systems North America has a demonstrable track record of excellent stewardship of its acquired U.S. businesses, having increased investment, grown jobs, improved performance and consistently achieved double digit annual growth. We look forward to welcoming UDI's management team and employees into BAE Systems North America. Culturally, it's a great match - BAE Systems and UDI have common values and a similar heritage, with long histories of innovation and commitment to national security."
The acquisition is conditional, among other things, upon receiving the required regulatory clearances, UDI shareholder approval, and the approval of BAE Systems shareholders at an Extraordinary General Meeting and is expected to close by mid 2005. It will be financed through a combination of a cash placing of new equity, a new debt facility, and existing internal resources.
Source: BAE Systems