BAE to Purchase Pentagon GPS Contractor -- WSJ
By Doug Cameron
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (January 21, 2020).
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.
The businesses are being sold by United Technologies and
Raytheon as the companies are seeking regulatory approval for their
own planned merger. That deal, announced last year, will create the
world's second-largest military supplier by sales. Analysts expect
further disposals to be required before the deal closes.
BAE Chief Executive Charles Woodburn said the twin buys were a
"once in a lifetime opportunity" that would immediately boost
"It's rare that two businesses of this quality, with such strong
growth prospects and close fit to our portfolio, become available,"
Mr. Woodburn said in a statement.
GPS systems are installed on more than 1.5 million pieces of
military equipment world-wide. The Pentagon has mandated that both
new and existing GPS-enabled equipment has to be upgraded to meet
tougher standards that make it more resilient to cyberattacks and
Those new cybersecurity standards, known as "M-code," are a key
part of the overhaul of GPS, which also underpins consumer devices
like mobile phones. Collins is one of three companies cleared to
carry out much of the work, BAE said.
BAE has expanded in the U.S. over the past two decades by
acquiring makers of armored vehicles and electronic warfare
systems. The latest deal is the largest since it paid almost $2
billion for military vehicle specialist Armor Holdings Inc. in
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
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.
The planned merger still requires regulatory approval. Analysts
have flagged potential disposals of assets that generate more than
$10 billion in annual sales, including United Technologies'
aircraft interiors business. Some of those divestments, analysts
say, would address regulatory requirements, with others refining
the product lineup.
Write to Doug Cameron at email@example.com
(END) Dow Jones Newswires
January 21, 2020 02:47 ET (07:47 GMT)
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