BAE Systems (OTCMKTS:BAESY) has indicated that it plans to acquire the military Global Positioning System segment of Collins Aerospace. Equally, they want to acquire Raytheon Company’s (NYSE:RTN) Airborne Tactical Radios business as Raytheon tries to merge with United Technologies Corporation (NYSE:UTX).
BAE to Acquire GPS business for $2 billion
Jerry DeMuro, the CEO of BAE Systems, indicated that this is a great opportunity for the company to acquire critical GPS and radio capabilities. This will enable the company to enhance its position as a leading provider of defense communication and electronics systems. The CEO added that it fur4ther supports the company’s alignment with the US military modernization priorities as well as those of its partners.
The defense and aerospace company will acquire the GPS business for around $2 billion. The business is expected to generate around $359 million in revenues this year, with the potential of annual growth of 10%. The company also purchased Raytheon’s radio business for around $275 million. BAE system plans to fund the purchase of the business through its balance sheet while it will fund the purchase of the GPS business through new debt.
Deal subject to regulatory approval
However, the two acquisitions will need to pass some government regulatory hurdles. The success of the deal with Raytheon will also depend on the closure of its deal with UTC that the company announced in June. In October, shareholders approved the merger that will create the second-largest company in the aerospace sector.
The deal comes when the US Congress has approved an upgrade to the 1.5 million GPS units the company has supplied to the US air force. The company has indicated that it will make some investment to enhance its presence in Cedar Rapids, where the GPS operations are based.
The electronic systems business has been the company’s highest-performing segment, according to Chief executive Charles Woodburn. This acquisition is a massive opportunity for the company to bolster its portfolio, and the deals will immediately add to the company’s cash flow and earnings.