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18 Jan 08. BAE Systems has today entered into an agreement to acquire the companies comprising Tenix Defence, a leading Australian defence contractor, for up to A$775m (£356m) in cash.

Tenix Defence comprises four wholly owned businesses and two joint venture
interests. Terms have been agreed to acquire the wholly owned business for A$686m (£315m). Subject to pre-emption rights not being exercised, the joint venture interests will form the remainder of the transaction. Tenix
Defence divisions comprise:

– Tenix Land: a leading military vehicle supplier and provider of through life
support to the Australian Defence Force with an additional presence in
defence services

– Tenix Aerospace: a provider of systems integration, modification and support
activities, including through-life support, across a number of major
aircraft platforms

– Tenix Electronic Systems: an information and defence electronics business
with a core capability in technology and subsystems development

– Tenix Marine: a leading provider of maritime acquisition and support
programmes in Australia, New Zealand and the South East Asian region

The two joint ventures are RLM, with Lockheed Martin, which provides ongoing system upgrade, maintenance and support services for the Jindalee Operational Radar Network and Tenix Toll Defence Logistics, with Toll Logistics, which manages warehousing, engineering, distribution and maintenance activities for the Australian Defence Force.

Tenix Defence will be integrated with the operations of BAE Systems Australia,
headquartered in Adelaide.

The acquisition of Tenix Defence more than doubles BAE Systems’ presence in
Australia making it the largest in-country defence supplier to the Australian
Defence Force. With over 5,500 people and annual sales of over A$1.2bn
(£550m) the company will deliver enhanced capabilities in the Land, Sea,
Air and Joint domains. The organisations are an excellent fit and have largely complementary programmes and capabilities.

The acquisition of Tenix Defence is a significant step in the implementation of
BAE Systems’ strategy to develop as the premier global defence and aerospace company. Australia is one of BAE Systems’ six home markets and has attractive
prospects arising from the Australian Government’s commitment to increase defence spending by 3% per annum in real terms until 2015-16 and its preference
to maintain a strong national defence capability.

For the twelve month period ended 30 June 2007, Tenix Defence generated proforma
EBITDA of A$56m (£26m) on sales of A$699m (£321m).

The proposed acquisition is expected to deliver a return in excess of BAE
Systems’ cost of capital in the first full year following the proposed acquisition.

Commenting on the proposed acquisition, Mike Turner, Chief Executive of BAE
Systems, said: “I am delighted that we have agreed to acquire Tenix Defence, which will transform our business in Australia.”

Jim McDowell, Chief Executive of BAE Systems Australia, added: “This transaction significantly enhances the depth and breadth of our capabilities in Australia and adds a major naval business to our portfolio and significantly increases our land capability. The combination of the two companies will enable us better to equip and support the Australian Defence Force for many years to come.”

The purchase consideration is subject to customary post completion adjustments.
Completion is conditional upon certain regulatory clearances, other third party consents and final verification of certain matters and is expected in the first half of 2008.

BAE Systems has been advised in this transaction by Lehman Brothers.

This transaction squares the circle in the recent contract win for the Australian MoDs Land 121 truck requirement.(See BATTLESPACE ALERT Vol.9 ISSUE 19, 05 October 2007, B

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