BAE Systems has agreed a deal to acquire the Ball Aerospace business from Ball Corporation for $5.55bn (£4.3bn) in cash.

A definitive stock purchase agreement is subject to customary closing adjustments.

Ball Aerospace is a provider of spacecraft, mission payloads, optical systems, and antenna systems with decades of proven success underpinned by world class advanced technologies. The US company is headquartered in Colorado, with more than 5,200 employees, of whom over 60% hold US security clearances.

BAE Systems, the largest defence contractor in Europe, confirmed that its proposed stock transaction will be treated as an asset purchase for federal tax purposes, with an expected net present value tax benefit of $750m (£587m) making the underlying economic consideration for the business $4.8bn (£3.8bn).

The group is targeting a completion for the acquisition in the first half of 2024 and revealed the agreement includes a termination fee of $100m (£78.3m) payable to Ball Aerospace’s parent company in the event the transaction is terminated should certain required regulatory conditions not met be within the agreed timeframe.

BAE Systems, which is headquartered in Farnborough in the UK, employs over 93,000 people and generated revenue of £21.26bn last year.

The group suggested the acquisition represents a “unique opportunity” to strengthen its portfolio with “significant scale and high-end technology capabilities”. BAE Systems has estimated that Ball Aerospace will add more than $2bn in annual revenues in the growing space domain, C4ISR and missile and munitions markets, and provide the arms manufacturer’s US business with a position in some of the fastest growing segments of the defence market.

Chief executive of BAE Systems, Charles Woodburn, said: “The proposed acquisition of Ball Aerospace is a unique opportunity to add a high-quality, fast growing technology focused business with significant capabilities to our core business that is performing strongly and well positioned for sustained growth. 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.

“The strategic and financial rationale is compelling, as we continue to focus on areas of high priority defence and intelligence spending, strengthening our world class multi-domain portfolio and enhancing our value compounding model of top line growth, margin expansion and high cash generation.

“We couldn't be more pleased to have reached this agreement and we look forward to welcoming the employees of Ball Aerospace to BAE Systems as we work together to support our customers and create value for shareholders.”

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