vsvo
03-07-2005, 12:19
News Story (http://story.news.yahoo.com/news?tmpl=story&cid=580&e=2&u=/nm/20050307/bs_nm/arms_udi_bae_dc)
By Jason Neely, European Aerospace & Airlines Correspondent
LONDON (Reuters) - Britain's BAE Systems announced a $3.97 billion takeover of U.S. armored car maker United Defense Industries on Monday, expanding its lead over European rivals in the U.S. market.
BAE said it would pay $75 a share for the maker of the Bradley Fighting Vehicle, a premium of 29 percent over United Defense's close of $58.26 on Friday.
The move puts BAE in line for lucrative repair and overhaul work on Bradley vehicles involved in operations in Iraq (news - web sites) and Afghanistan (news - web sites).
It also gains a company set to play a key role in the $100 billion Future Combat Systems program, which will provide the U.S. Army with a new generation of armored vehicles.
Chief Executive Mike Turner told reporters on a conference call the deal underscored BAE's trans-Atlantic strategy.
"We are very comfortable with the price we have paid; we think it's a fair price," Turner said.
BAE Group Finance Director George Rose said that North America generated 25 percent of BAE's profits last year but would have contributed about a third on a pro forma basis if United Defense were included.
"We do see this as a big improvement in the risk profile and the quality of the profits of the group," he said on the conference call.
COMPETITIVE PROCESS
With United Defense, BAE moves closer to top-ranked General Dynamics in the land systems sector, having bolstered its role with its purchase of UK-based Alvis last year.
Turner said BAE had won out over a number of other firms seeking to buy United Defense: "It was a competitive process. We had a busy weekend."
The interest shown reflects the importance of armored vehicles in recent conflicts, BAE said in a statement: "As a result of the global war on terror and ongoing operations in Iraq and Afghanistan, the U.S. Department of Defense (news - web sites) has significantly shifted its priorities and budget toward land systems."
President Bush (news - web sites)'s supplemental budget request submitted to Congress last month called for $5.4 billion to refit or repair equipment being used in Iraq and Afghanistan, including Bradleys seeing five times their usual rate of use.
More than 7,000 Bradley vehicles have been produced, and the vehicle is expected to remain in the U.S. Army fleet until 2030.
FINANCING
BAE said it expected the deal to close in mid-2005 and it did not expect U.S. political opposition to its 13th U.S. acquisition.
The company said it would finance the deal with a new $3 billion debt facility and a placement of shares, announcing later in the day it had raised 360 million pounds ($690.2 million) by placing 150 million shares at 240 pence each.
BAE shares fell as much as 3.6 percent in early trade and were 1.9 percent lower at 245-1/4p at 1623 GMT. United Defense was up 26 percent at $73.43.
"Apart from the valuation, which looks slightly on the high side, everything else stacks up," said SG Securities analyst Zafar Khan.
Reaction in the credit market was limited, despite the large slug of debt in the deal, traders said. The cost of insuring against a default by BAE edged higher.
Fitch Ratings announced it would keep BAE's senior unsecured 'BBB+' and short-term 'F2' ratings on Rating Watch Negative.
"Should the acquisition proceed as per the announced terms, Fitch expects to downgrade BAE's senior unsecured and short-term ratings by a notch due to the negative impact of the substantial additional leverage on its credit metrics," Fitch said in a statement.
In addition to Bradley vehicles, United Defense builds naval guns, missile launchers and munitions and repairs warships.
The much larger BAE is involved in nuclear submarines, the Eurofighter jet and missile maker MBDA and also holds a 20 percent stake in civil plane maker Airbus.
While BAE is already Europe's biggest player in the U.S. defense market, Turner said the acquisition of United Defense would make the DoD its biggest customer and BAE the DoD's sixth largest supplier.
By Jason Neely, European Aerospace & Airlines Correspondent
LONDON (Reuters) - Britain's BAE Systems announced a $3.97 billion takeover of U.S. armored car maker United Defense Industries on Monday, expanding its lead over European rivals in the U.S. market.
BAE said it would pay $75 a share for the maker of the Bradley Fighting Vehicle, a premium of 29 percent over United Defense's close of $58.26 on Friday.
The move puts BAE in line for lucrative repair and overhaul work on Bradley vehicles involved in operations in Iraq (news - web sites) and Afghanistan (news - web sites).
It also gains a company set to play a key role in the $100 billion Future Combat Systems program, which will provide the U.S. Army with a new generation of armored vehicles.
Chief Executive Mike Turner told reporters on a conference call the deal underscored BAE's trans-Atlantic strategy.
"We are very comfortable with the price we have paid; we think it's a fair price," Turner said.
BAE Group Finance Director George Rose said that North America generated 25 percent of BAE's profits last year but would have contributed about a third on a pro forma basis if United Defense were included.
"We do see this as a big improvement in the risk profile and the quality of the profits of the group," he said on the conference call.
COMPETITIVE PROCESS
With United Defense, BAE moves closer to top-ranked General Dynamics in the land systems sector, having bolstered its role with its purchase of UK-based Alvis last year.
Turner said BAE had won out over a number of other firms seeking to buy United Defense: "It was a competitive process. We had a busy weekend."
The interest shown reflects the importance of armored vehicles in recent conflicts, BAE said in a statement: "As a result of the global war on terror and ongoing operations in Iraq and Afghanistan, the U.S. Department of Defense (news - web sites) has significantly shifted its priorities and budget toward land systems."
President Bush (news - web sites)'s supplemental budget request submitted to Congress last month called for $5.4 billion to refit or repair equipment being used in Iraq and Afghanistan, including Bradleys seeing five times their usual rate of use.
More than 7,000 Bradley vehicles have been produced, and the vehicle is expected to remain in the U.S. Army fleet until 2030.
FINANCING
BAE said it expected the deal to close in mid-2005 and it did not expect U.S. political opposition to its 13th U.S. acquisition.
The company said it would finance the deal with a new $3 billion debt facility and a placement of shares, announcing later in the day it had raised 360 million pounds ($690.2 million) by placing 150 million shares at 240 pence each.
BAE shares fell as much as 3.6 percent in early trade and were 1.9 percent lower at 245-1/4p at 1623 GMT. United Defense was up 26 percent at $73.43.
"Apart from the valuation, which looks slightly on the high side, everything else stacks up," said SG Securities analyst Zafar Khan.
Reaction in the credit market was limited, despite the large slug of debt in the deal, traders said. The cost of insuring against a default by BAE edged higher.
Fitch Ratings announced it would keep BAE's senior unsecured 'BBB+' and short-term 'F2' ratings on Rating Watch Negative.
"Should the acquisition proceed as per the announced terms, Fitch expects to downgrade BAE's senior unsecured and short-term ratings by a notch due to the negative impact of the substantial additional leverage on its credit metrics," Fitch said in a statement.
In addition to Bradley vehicles, United Defense builds naval guns, missile launchers and munitions and repairs warships.
The much larger BAE is involved in nuclear submarines, the Eurofighter jet and missile maker MBDA and also holds a 20 percent stake in civil plane maker Airbus.
While BAE is already Europe's biggest player in the U.S. defense market, Turner said the acquisition of United Defense would make the DoD its biggest customer and BAE the DoD's sixth largest supplier.