BAE Systems is acquiring Ball Aerospace for $5.55 billion in a deal that will strengthen the defense contractor’s position in space, missile and surveillance technologies, the companies announced Thursday.
The all-cash purchase of the aerospace technology firm will expand BAE’s offerings to U.S. intelligence agencies and the military. BAE said it expects the deal to boost annual revenue growth to around 10% over the next five years.
BAE Systems shares were down around 3.5% at the time of writing on Thursday and are 20% higher year-to-date.
Ball Aerospace makes space systems, sensors, antennae and other technologies used in national security and civil space programs. BAE said the acquisition will complement its military electronics operations with new space and geospatial intelligence capabilities.
The British defense giant said it expects the deal to lift profit margins and earnings per share starting in the first year after closing. Return on invested capital is forecast to top BAE’s weighted average cost of capital within five years.
BAE plans to fund the purchase using new debt and existing cash. It said the deal fits within its capital allocation policy and won’t prevent share repurchases.
The transaction is valued at $4.8 billion after factoring in expected tax benefits. BAE said it expects to close the acquisition following U.S. regulatory reviews.