Leading aerospace and defence company BAE Systems has this morning announced that it will purchase Collins Aerospace’s military GPS system for almost $2bn (£1.5).
BAE say that the GPS business, which is considered a market leader, should generate revenues of $359m a year in 2020, with potential for growth of 10 per cent a year.
The multinational also announced the purchase of fellow defence contractor Raytheon’s airborne tactical radios business for $275m.
The business, which supplies communications systems to the US Department of Defence, will be funded by cash from BAE’s balance sheet, while the GPS system will be bought using new debt.
The acquisition comes as the US Congress has authorised the upgrade of 1.5m GPS units that the firm had provided to the US air force.
BAE said that they would make a small investment to develop a small presence in Cedar Rapids, where Collins’ GPS operations are based.
The multinational will take on roughly 675 of Collins’ employees, but expects no other challenges to the integration.
Both purchases are subject to the successful closure of Raytheon’s merger with United Technologies Corporation, which is expected in the first half of 2020.
The company said that the GPS business would be highly complementary to its electronics systems division, which it has targeted for growth.
BAE’s chief executive Charles Woodburn said: “These proposed acquisitions present a unique opportunity to add high quality, technology focused businesses to our electronics systems sector.
“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.”
He added that the firm would still look to make organic acquisitions as previously suggested.
On a call with reporters, president Tom Arseneault said that he “could not be more delighted to add these two respected market leaders to BAE’s portfolio.”
BAE’s shares rose nearly four per cent this morning, making it the FTSE 100’s top performing stock.
Last month the firm announced that it would recruit 800 more apprentices throughout the UK in 2020.
The company is already the UK’s biggest manufacturing employer, with 34,000 employees, and spends £100m a year on education and skills training.
BAE has been under fire in recent months for its role in the conflict in Yemen, with a group of human rights organisations complaining to the International Criminal Court (ICC), accusing European arms executives at firms such as BAE, Airbus and Raytheon of “aiding and abetting” the alleged crimes.
BAE Systems is contracted to the UK government, not to Saudi entities in the selling of arms to the kingdom.
A spokesperson for BAE Systems said: “We provide defence equipment, training and support under government to government agreements between the UK and KSA [the Kingdom of Saudi Arabia].
“We comply with all relevant export control laws and regulations in the countries in which we operate. Our activities are subject to UK government approval and oversight.”