BAE buys Bradley maker in £2bn US expansion

BAE systems, Europe's biggest defence contractor, dramatically increased its presence in the United States market yesterday by agreeing to pay $4.2bn (£2.2bn) for United Defense Industries (UDI), the maker of the Bradley fighting vehicle.

The deal, funded in part through a £360m share placing, turns BAE into the world's second-biggest supplier of military land vehicles and strengthens its position in the event of a future transatlantic defence merger with one of its US rivals.

The takeover of UDI was sealed on Sunday after an auction over the weekend involving a number of other US defence contractors, thought to include Boeing, Lockheed Martin and Raytheon. BAE is paying $75 a share, a 29 per cent premium to the company's closing price on Wall Street last week.

The US will account for a quarter of BAE's revenues, one-third of its profits and nearly 40 per cent of its 90,000-strong worldwide workforce when the deal is completed in the middle of the year. It will also make the Pentagon by far the biggest customer of BAE, accounting for some 25 per cent of its sales.

Asked why BAE had been so keen to buy a US manufacturer of fighting vehicles, Mike Turner, its chief executive, replied: "Because, like the robber of the bank said, that's where the money is." There are more than 7,000 of the vehicles in service and $1.3bn has been set aside in this year's US defence budget for the fleet's upgrade, which has been extensively deployed in Iraq and Afghanistan.

UDI is also partnering General Dynamics of the US on the Pentagon's future combat systems programme, which is worth $100bn. It also owns the Swedish military vehicles and munitions supplier Bofors.

The UDI deal is the biggest BAE has pulled off since the 1999 takeover of Marconi's defence business and is its largest single acquisition to date in the US market. In the past six years, BAE has spent $3.25bn buying 12 American defence companies. The UDI takeover will more than double BAE's spending to $7.4bn.

BAE already owns the UK land vehicles maker Alvis and Haglunds of Sweden. Following the UDI deal its land systems division will have sales of $3bn to $4bn, putting it slightly behind the market leader General Dynamics. UDI has a workforce of 8,000 in 25 locations in the US and Sweden and last year earned profits before interest and tax of $293m on sales of $2.3bn. UDI also owns four US naval yards.

Mr Turner said that BAE had begun looking seriously at bidding for UDI in January. He said he hoped BAE would not be drawn into a bid battle for UDI, pointing out that its offer had been accepted after the US company had weighed competing bids from other defence contractors. UDI will be liable to pay BAE a break fee of $119m if it accepts a higher rival offer.

The deal is being funded mainly through a new $3bn debt facility although BAE yesterday raised £360m in fresh equity after Dresdner Kleinwort Wasserstein and Hoare Govett placed 150 million new shares with City institutions at 240p.

Start your day with The Independent, sign up for daily news emails
Sport
Floyd Mayweather will relinquish his five world titles after beating Manny Pacquiao
boxing
Arts and Entertainment
tvGame of Thrones season 5 ep 4, review - WARNING: contains major spoiliers!
News
Tottenham legend Jimmy Greaves has defended fans use of the word 'Yid'
people
Life and Style
tech
Arts and Entertainment
The Ridiculous Six has been produced by Adam Sandler, who also stars in it
filmNew controversy after nine Native American actors walked off set
Life and Style
Google celebrates Bartolomeo Cristofori's 360th birthday
techGoogle Doodle to the rescue
ebooks
ebooksA celebration of British elections
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Claims Administrator

£16000 - £18500 per annum: Recruitment Genius: This is an excellent opportunit...

Recruitment Genius: Senior SEO Executive

£24000 - £28000 per annum: Recruitment Genius: A Senior SEO Executive is requi...

Recruitment Genius: Online Customer Service Administrator

£16000 - £18000 per annum: Recruitment Genius: An Online customer Service Admi...

Recruitment Genius: Digital Marketing Executive

£18000 - £22000 per annum: Recruitment Genius: This global, industry leading, ...

Day In a Page

Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

Fishing is on Nigel Farage's mind

Ukip leader casts a line to the disaffected
Who is bombing whom in the Middle East? It's amazing they don't all hit each other

Who is bombing whom in the Middle East?

Robert Fisk untangles the countries and factions
China's influence on fashion: At the top of the game both creatively and commercially

China's influence on fashion

At the top of the game both creatively and commercially
Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

The man known as GOD has a reputation for getting the job done

Lord O'Donnell's three principles of rule
Rainbow shades: It's all bright on the night

Rainbow shades

It's all bright on the night
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power
Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

The price to be paid for challenging the rule of extremists

A revolution now 'consuming its own children'
Welcome to the world of Megagames

Welcome to the world of Megagames

300 players take part in Watch the Skies! board game in London
'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

Charlotte Gainsbourg on 'Nymphomaniac'

Starring in one of the most explicit films ever
Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

Robert Fisk in Abu Dhabi

The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

Vince Cable exclusive interview

Charging fees for employment tribunals was 'a very bad move'
Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

Iwan Rheon is returning to his Welsh roots

Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
Russell Brand's interview with Ed Miliband has got everyone talking about The Trews

Everyone is talking about The Trews

Russell Brand's 'true news' videos attract millions of viewers. But today's 'Milibrand' interview introduced his resolutely amateurish style to a whole new crowd
Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

It's time for my close-up

Meet the man who films great whites for a living