BAE Systems Inc. has announced agreements to buy Collins Aerospace’s Military Global Positioning System business and Raytheon’s Airborne Tactical Radios business.
The company, which is the U.S. subsidiary of U.K.-based BAE Systems PLC, said in a statement that the two “high-performing businesses” are being sold to clear the way for the merger of United Technologies Corp., which is Collins’ parent company, and Raytheon.
BAE Systems said the proposed acquisitions are structured as asset transactions with associated tax benefits, and they remain subject to customary closing adjustments.
BAE would pay $1.925 billion in cash for the Collins military GPS business, which is based in Cedar Rapids, Iowa, with an expected tax benefit of approximately $365 million. For Raytheon’s ATR business, based in Fort Wayne, Indiana, and Largo, Florida, BAE would pay $275 million in cash, with an expected tax benefit of approximately $50 million.
UTC and Raytheon in June announced plans to combine operations in a “merger of equals” that would create the world’s second-largest aerospace and defense business, with a market capitalization of $120 billion and $74 billion in annual revenue.
Pentagon officials involved in the awarding of military contracts have said they do not consider the consolidation a threat to market competition, but the U.S. Justice Department, which will likely have the final say in the matter, has its own criteria and rarely allows two prominent industry players to join forces while entirely intact.
The transaction is expected to close in the first half of this year. The combined company’s headquarters is to be in Massachusetts. UTC’s Pratt & Whitney would continue to have its headquarters in East Hartford.
“As militaries around the world increasingly operate in contested environments, the industry-leading, battle-tested products of these two businesses will complement and extend our existing portfolio of solutions we offer our customers,” said Jerry DeMuro, CEO of BAE Systems Inc.
“This unique opportunity to acquire critical radio and GPS capabilities strengthens our position as a leading provider of defense electronics and communications systems, and further supports our alignment with the modernization priorities of the U.S. military and its partners.”
The acquisitions are subject to the successful closure of the Raytheon-UTC transaction, as well as the satisfaction of other customary closing conditions, including receipt of the required U.S. regulatory approvals.
Upon closure, both business lines would be integrated into the company’s Electronic Systems sector.
“These are strong businesses with talented employees who share our focus on quality and technology innovation,” said Tom Arseneault, President and COO of BAE Systems, Inc. “We are confident of a smooth transition that will accelerate our future together and look forward to welcoming these new employees to the BAE Systems team once the transactions are approved.”
