BAE is spending $5.55 billion to buy Ball Aerospace

BAE Systems plc (LON: BA) just revealed plans of buying the aerospace business of Ball Corp (NYSE: BALL) for $5.55 billion in cash.

What’s in it for BAE Systems?

The said acquisition will help expand its footprint in space systems and defence technologies and be accretive to its margins and per-share earnings in a year after completion, as per the press release.

BAE expects the transaction to complete in the first six months of 2024 provided that it satisfies the customary closing conditions including regulatory approvals. According to its CEO Charles Woodburn:

It’s a unique opportunity to add high-quality, fast-growing, tech focused business with significant capabilities to our core business that’s performing strongly and well-positioned for sustained growth.

BAE shares are down 4.0% following the announcement on Thursday.

What’s in it for Ball Corp?

BAE expects Ball Aerospace to see about $310 million in adjusted EBIDTA and about $2.2 billion in revenue this year.

It’s convinced that the Colorado-headquartered firm will grow at a compound annual rate of 10% in the coming years. CEO Woodburn also said today in a press release:

It’s rare that a business of this quality, scale and complementary capabilities, with strong growth prospects and a close fit to our strategy, becomes available. Strategic and financial rationale is compelling.

Ball Corp will be a more focused and high-margin aluminum packaging business once the deal is complete. It plans on using proceeds from it to lower net debt, pay dividend and execute share buybacks.