- It marked the biggest purchase in the firm’s history.
- The final size of the bond offering will be determined on the day of the sale.
The bond sale will refinance a $4 billion facility taken out by the company in August
BAE Systems Eyes at Least $4 Billion to Fund Ball Aerospace Purchase
- UK defense firm agreed to buy Ball Aerospace for $5.6 billion
- New bond issue would mark latest debt sale for M&A financing
8m ago
Bloomberg News
,(Bloomberg) -- UK defense company BAE Systems Plc is sounding out investors for a corporate bond sale that could top $4 billion to help refinance a bridge loan it used to acquire Ball Aerospace, according to people familiar with the matter.
The firm agreed to buy Ball Aerospace in August in a $5.6 billion deal as a way to reach into space, a frontier the company predicts will become increasingly important in warfare. It marked the biggest purchase in the firm’s history. The final size of the bond offering will be determined on the day of the sale.
The bond sale will refinance a $4 billion facility taken out by the company in August. It’s the latest in a slew of deals earmarked for mergers and acquisition financings after the worst year in a decade for buyout funding.
BAE Systems and Bank of America Corp., which coordinated investor calls for the sale Monday, did not immediately reply to requests for comment.
Borrowers are rushing into corporate bond markets at the fastest clip on record to lock in financing while spreads are tight, keeping all-in borrowing costs lower. Companies such as Bristol Myers Squibb, Cisco Systems Inc. and AbbVie Inc. have been able to lure outsized orders for offerings tied to mergers and acquisitions.
Read More: Bond Markets Are Flooded With Deals to Fund M&A: Credit Weekly
Sales momentum is extending this week ahead of the Federal Reserve’s rate decision Wednesday, which could slow the flow of new bond issuance. Eight borrowers tapped the bond market on Monday with $25 billion to $30 billion of issuance expected this week.
Moody’s Ratings upgraded BAE Systems’ credit grade at the end of February to Baa1, three steps above speculative grade, from Baa2, citing strong growth prospects and an expectation the company will strengthen its credit ratios again following the largely debt-financed acquisition.
--With assistance from Brian Smith.
New Business: Space & Mission Systems// BAE Systems plans to acquire Ball Corporation's aerospace division for $5.6 billion
BAE Systems is Britain's largest defense company.
- Citigroup and Bank of America served as BAE Systems’ financial advisors and KPMG served as accounting advisor.
- Kirkland & Ellis LLP served as transaction counsel, and
- Covington & Burling LLP served as CFIUS counsel for the transaction.
Space & Mission Systems | BAE Systems
BAE Systems Secures Regulatory Approvals for Acquisition of Ball Aerospace
Contacts
For further information:
Investors
Martin Cooper
Investor Relations Director
Telephone: +44 (0)1252 383455
Email: investors@baesystems.com
Media Relations
Kristina Anderson
Director, Media Relations
Telephone: +44 (0)7540 628673
Email: kristina.anderson@baesystems.com
___________________________________________________________________________________
Ball Shares Surge as BAE System Buys Its Aerospace Operations for $5.6 Billion
Ball Corporation's (BALL) shares surged 3% in early trading on Thursday after the aluminum packaging company agreed to sell its aerospace business for $5.6 billion to BAE Systems, Britain's largest defense company.1
KEY TAKEAWAYS
- BAE Systems plans to acquire Ball Corporation's aerospace division for $5.6 billion.
- Roughly half of the proceeds of the deal will be spent to reduce Ball's $9.7 billion debt.
- The company also plans to use the funds to grow faster and give money back to stockholders through buybacks and dividends.
The price is nearly 20 times the aerospace division's earnings before interest, taxes, depreciation, and amortization (EBITDA) for the last year. Ball said it plans to use about half of the after-tax amount of $4.5 billion to reduce its $9.7 billion debt, as part of the company's strategy to maintain a conservative level of debt.1
The sale proceeds will also be used to give money back to shareholders through share buybacks and dividends, as well as contribute to faster organic growth, Ball said.
Ball Aerospace's space-related programs were expected to account for about 70% of its estimated 2023 revenue of $2.2 billion, and a number of defense companies and private equity firms competed to purchase it.2
The acquisition could allow BAE Systems to advance in some of the fastest-growing segments of the defense market, and address rising demand for space systems in the U.S.
Subject to the usual regulatory approvals and closing conditions, the deal is expected to be finalized in the first half of 2024.1
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Feb 16, 2024
BAE Completes Acquisition of Ball Aerospace
- Ball Aerospace becomes new Space & Mission Systems business of BAE Systems, Inc.
BAE Systems has now successfully completed the acquisition of Ball Aerospace from Ball Corporation. This acquisition adds market-leading space, science and defense capabilities to the company’s portfolio of products and services through a new business called Space & Mission Systems.
This marks a significant milestone for the BAE Systems business, adding more than 5,200 U.S. employees who share a culture of mission-focused innovation and operational excellence.
Citigroup and Bank of America served as BAE Systems’ financial advisors and KPMG served as accounting advisor. Kirkland & Ellis LLP served as transaction counsel, and Covington & Burling LLP served as CFIUS counsel for the transaction.
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