On 17 August, BAE Systems—a UK-based supplier of high-tech systems and advanced engineering for the worldwide defense, security and aerospace markets, and the largest defense contractor in Europe—announced its plans to acquire the Ball Aerospace division of US-based Ball Corporation. The total value of the all-cash transaction will be US$5.6 billion, with the deal expected to close in the first quarter of calendar 2024, subject to regulatory approval.
A familiar name to anyone who has ever dabbled in home canning, Ball Corp.—whose origins date to the late 1800s—today drily describes itself as “the world’s leading producer of circular aluminum packaging for global beverage and household brands.” (In other words, aluminum cans.) The company first entered the aerospace business as part of a round of diversification in the 1950s. In the quarter ended 30 June 2023, aerospace revenues accounted for US$499 million of Ball Corp.’s total revenues of US$3.566 billion, with beverage packaging kicking in virtually all of the rest. Ball Aerospace currently employs more than 5,200 persons.
In recent years, Ball Aerospace has been perhaps best known for its work on the James Webb Space Telescope (JWST). Ball designed and built the observatory’s iconic 6.5-m gold-covered, nanometer-smooth segmented primary mirror, along with the cryogenic actuators and control electronics required to shape and orient the mirror in deep space, 1.5 million km from Earth.
In addition to its JWST work, Ball Aerospace has provided optics and imaging technology for a number of other marquee science projects for NASA. These include the Ralph imager and spectrometer on the New Horizons spacecraft that flew by Pluto in 2015; a camera and scientific instrument module on the Chandra X-Ray Observatory; and a variety of science instruments on the Hubble Space Telescope. Most recently, the firm has been tapped to work on the optomechanical assembly for the Wide-Field Instrument on the Nancy Grace Roman Space Telescope, slated for launch in 2027. Ball also does business in a variety of projects in defense and commercial aerospace.
Synergies seen with BAE Systems
During the 2023 second quarter, Ball Corp. signaled that it was “considering options that could better position its aerospace business to provide value to shareholders and customers.” With the sale of its aerospace arm to BAE Systems, the company will now focus entirely on running and expanding its global packaging business and on “acceleration of low-carbon, best-value aluminum packaging initiatives.” Ball Corp. expects to use around half of the aftertax proceeds from the deal to pay down existing debt to strengthen its balance sheet, and also plans as-yet-unquantified share buybacks and dividends from the funds.
BAE Systems, for its part, sees the opportunity for a variety of synergies from the acquired company, particularly in defense businesses such as electronic warfare, space defense and “C4ISR” (Command, Control, Communications, Computers, Intelligence, Surveillance and Reconnaissance). In a press release accompanying the announcement, BAE Systems noted the potential for a “highly complementary [business] fit adding material scale of high-caliber space, optical and antenna solutions,” and an “excellent cultural fit with a long and distinguished track record of innovation and product development.”
BAE Systems believes the purchase could contribute compound annual revenue growth on the order of 10% over the next five years, and that it should start contributing to both earnings and cash flow per share in the first year after purchase. In a press release, it noted that that the order backlog for Ball Aerospace has doubled in size over the past five years.
Charles Woodburn, CEO of BAE Systems, called the deal “a unique opportunity to add a high-quality, fast-growing technology-focused business with significant capabilities to our core business,” adding that it’s “rare that a business of this quality, scale and complementary capabilities, with strong growth prospects and a close fit to our strategy, becomes available.”