07 May 07. BAE Systems plc announces that its wholly-owned U.S. subsidiary BAE Systems, Inc. has entered into a definitive merger agreement to acquire Armor Holdings Inc. for $88 per share in cash, representing a total consideration for Armor Holdings’ fully diluted share capital of approximately $4,144m (£2,080m). Including the assumption of net debt of $388m (£195m), the transaction is valued at $4,532m(£2,275m). Headquartered in Jacksonville, Florida, Armor Holdings is a major manufacturer of tactical wheeled vehicles and a leading provider of vehicle and individual armor systems and survivability technologies for the military and adjacent law enforcement and commercial security markets.
Armor Holdings reported sales of $2,361m and profit before tax of $214m for the year ended 31 December 2006. As at 31 December 2006 Armor Holdings had total assets of $2,318m. Armor Holdings employs over 8,000 people in 63 locations throughout the U.S. and internationally, including the UK. The proposed acquisition will be financed through a combination of a placing of new ordinary shares in BAE Systems, and existing internal resources. The placing is being launched on Tuesday 8 May 2007, and is not conditional upon the completion of the proposed acquisition. The proposed acquisition is expected to be immediately accretive to BAE Systems’ earnings as well as delivering returns in excess of BAE Systems’ cost of capital in the second full year (2009) following the proposed acquisition, before goodwill and amortization.
The proposed acquisition is a significant step in the implementation of BAE Systems’ strategy to grow as the premier global defense and aerospace company by: * expanding and developing its business in the United States,
* expanding its global land systems business, and
* developing its worldwide through-life support, solutions and services activities. The proposed acquisition will strengthen BAE Systems’ position as one of the world’s leading land systems businesses. The integration of Armor Holdings into BAE Systems Land and Armaments sector is expected to increase BAE Systems’ U.S. sales by more than $3bn by the addition of complementary revenue streams from several priority tactical vehicle programs. BAE Systems’ global marketing presence will enhance Armor Holdings ability to offer tactical wheeled vehicle replacement programs in overseas markets. Current operations by armed forces have clearly signaled the urgent requirement for increased survivability and more effective armor systems. The combination of the complementary technologies of BAE Systems and Armor Holdings will better serve this need. BAE Systems brings expertise in combat vehicle design, rapid prototyping and survivability systems, and Armor Holdings brings expertise in automotive design and lean, high-volume manufacturing technologies. The combined business will be well-positioned to address significant new tactical vehicle requirements. The U.S. and UK armed forces, and many other nations’ armed forces, are experiencing an increased demand for tactical wheeled vehicles with increased survivability. Approximately 60 percent of the U.S. Army’s current stated medium truck requirements is still to be manufactured. This requirement, together with additional opportunities in relation to new vehicle programs – such as the Family of Medium Tactical Vehicles (FMTV), the Mine-Resistant Ambush Protected (MRAP) vehicle, and future prospects such as the Joint Light Tactical Vehicle (JLTV) – are expected to be valued at over $10bn. The proposed acquisition creates a significant opportunity for growth in readiness and sustainment activity. Armor Holdings has an installed base of more than 30,000 tactical wheeled vehicles and is addressing potential requirements to produce up to 60,000 more over the next 10 years. Combined with BAE Systems’ existing installed base of approximately 88,000 vehicles worldwide, this acquisition enables Armor Hol