BAE Agrees to Acquire United Defense Industries

British Military Contractor Seeks Bigger U.S. Presence Through $3.97 Billion Deal

The Wall Street Journal 03/07/05
author: Dennis K. Berman
author: Jason Singer
(Copyright (c) 2005, Dow Jones & Company, Inc.)

British defense contractor BAE Systems PLC Monday agreed to buy United Defense Industries Inc., maker of the Bradley Fighting Vehicle, for $3.97 billion.

The deal marks the biggest recent move by a European defense company to boost its presence in the U.S., which is by far the world's biggest buyer of military equipment.

The acquisition of United Defense, of Arlington, Va., would catapult BAE, which is already the largest foreign contractor to the Pentagon, far ahead of all non-U.S. rivals. BAE, based in London, already is a major European maker of combat vehicles; the deal would deepen BAE's presence in the rapidly expanding and much larger U.S. market. The U.S. fleet has been deteriorating amid service in Iraq, Afghanistan and elsewhere, and spending on such vehicles is expected to increase as part of the Pentagon's huge modernization program, called Future Combat Systems.

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European defense companies have lately been on a buying spree in the U.S. Last year alone, companies like BAE, Smiths Group PLC and European Aeronautic Defence & Space Co. spent about $1.5 billion on a dozen acquisitions. A UDI deal would be the largest and most important trans-Atlantic defense deal struck in recent years. EADS, which owns aircraft maker Airbus along with BAE, has lobbied hard for a chance to bid on a potentially huge contract with the U.S. Air Force for midair-refueling tanker jets, after Boeing Co. was stripped of a contract awarded in 2001.

United Defense Industries also develops a range of other military systems, including howitzers, guided missiles and precision munitions. The company also provides ship repair and modernization services.