BAE Systems Makes Big Purchase – By Todd Horwitz, Bubba Trading

 

 

BAE Systems PLC is doubling down on the U.S. defense market with its biggest acquisition in more than a decade, agreeing to buy a business that tracks everything from jet fighters to tanks from United Technologies Corp. for $1.93 billion.

The purchase of Collins Aerospace’s Military Global Positioning System business, owned by United Technologies, comes as the Pentagon tightens cybersecurity standards because of perceived rising threats from China and Russia.

The British defense-and-security company also said Monday it would pay $275 million for Raytheon Co.’s Airborne Tactical Radios business, which makes military communications equipment.

“Completion of both acquisitions are subject to successful closure of the Raytheon-United Technologies merger, as well as customary regulatory approvals and conditions,” the company said Jan. 20 in a statement. BAE Systems officials called the acquisitions “unique opportunities” to expand the company’s defense electronics, radio and GPS business.

“This strengthens our position as a leading provider of defense electronics and communications systems … as militaries around the world increasingly operate in contested environments,” Jerry DeMuro, CEO of BAE Systems, said in the company’s statement.

The proposed acquisitions would be integrated into BAE Systems’ Electronic Systems sector. Collins’ military GPS business, based in Cedar Rapids, Iowa, has been a supplier of military GPS receivers for more than 40 years. The company designs and produces GPS receivers that are compliant with military M-Code, anti-jamming, and anti-spoofing requirements. Collins says there are more than 1.5 million devices used today on approximately 280 types of weapons systems, ground and airborne platforms.

While the Pentagon has been looking to restrict overseas investment in the U.S. military-industrial base—to protect intellectual property and local suppliers—BAE’s wholly-owned U.S. arm has trusted-supplier status. It is already one of the Defense Department’s largest providers of equipment and systems.

The asset sales will dilute annual revenues of the proposed new Raytheon Technologies, though the combined company is still on track to leapfrog Northrop Grumman Corp. to become the world’s third-largest defense company after Lockheed Martin Corp.
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Todd “Bubba” Horwitz

Financial Markets and Political Commentary

 

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Todd Horwitz - Author of “Average Joe Options“. Todd began his trading career in 1980 at the CBOE. He was one of the original traders in the OEX & helped start the SPX. He is a member the CME where he trades S&P futures as well as foreign currencies & is a regular contributor to CNBC, Bloomberg, BNN, Fox & many other major news networks.