Behind BAe’s blistering $5.6bn Ball Aerospace deal

Behind BAe’s blistering $5.6bn Ball Aerospace deal

Feature articles |
By Nick Flaherty

BAE Systems has catapulted itself into the US space business with its $5.6bn bid to buy Ball Aerospace.

Ball is a conglomerate focused on aluminium for aerosols and packaging such as cans with plants all over the world, but felt that the aerospace division was undervalued. The resulting auction saw interest from General Dynamics and Textron as well as private equity firms Blackstone and Veritas Capital Fund Management, which owns CAES Space Systems.

The deal sees BAe Systems increase its US business from $200m to $2.2bn, with a major focus on space systems. “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,” said Charles Woodburn, Chief Executive of BAE Systems

“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,” he said.

Ball Aerospace has been provided the avionics systems for the Orion Moon mission and the James Webb Space Telescope and in March launched a prototype data centre into orbit. The payload was built in eight months and is equipped with Ball Aerospace-built Linux-based software, which features containerized applications that can be changed on-orbit, as well as real-time data processing functions.

Ball Aerospace in space 

“This payload is an informative rapid development opportunity allowing us to pioneer best practices and processes that will enable the reduction of non-recurring engineering on future missions,” said Mike Gazarik, Vice President of Engineering at Ball Aerospace.

The software payload uses containerized software, including a prototype version of Microsoft’s Azure Orbital Space SDK platform, to increase reuse and decrease costs and scheduling times. Algorithms hosted on-board are able to remove clouds from the imagery that are obstructing data or prioritize downlink of data based on image content.

“The rideshare project with Ball Aerospace using the Azure Orbital Space SDK shows customers how to optimize their space data in-orbit and create faster pathways to insights providing a strong foundation for future pursuits,” said Steve Kitay, senior director, Microsoft Azure Space. “This first phase of our on-orbit compute partnership is a step forward in bringing our mutual customers a standardized platform for application development in space.”

BAe sees the Ball Aerospace as well positioned in military and civil space, C4ISR, and missile and munitions. The space market exposure extends across positions in defence, intelligence, and scientific missions.

The division is  based in Colorado and has over 5,200 employees, of whom over 60% hold US security clearances. It has a backlog of $3bn of orders on its books and another $5bn of orders from deals in the pipeline.

“Since 1956, generations of dedicated Ball Aerospace colleagues have transformed a business of humble beginnings into a thriving enterprise offering innovative capabilities in a world that needs rapid, scalable technology solutions,” said Daniel Fisher, chairman and CEO.

“In recent years, the business has positioned itself to have an even greater contribution to customers’ missions and delivered fourfold growth and record levels of combined contracted and won-not-booked backlog. The complementary cultural fit of Ball Aerospace and BAE Systems and their combined position as a pure play aerospace and technologies company will leverage Ball’s recent investments in talent and facilities located across the country and centred in Boulder, Broomfield and Westminster, Colorado, to provide a multi-dimensional platform for vital national defense, intelligence, and science hardware, software, and space-based assets.”

BAe Systems in space 

As British Aerospace, BAe was involved in the space business for decades. Subsidiary British Aerospace Space Systems was sold to Matra Marconi Space in 1994 when its acquired Ferranti Satcomms, before the merger with GEC’s Marconi Electronic Systems created BAE Systems. In 2000, Matra Marconi was merged with the space division of DaimlerChrysler Aerospace AG (DASA) to form Astrium. BAE sold its 25% stake in June 2003 and the company became EADS Astrium and then part of Airbus. BAe Systems has developed its own technology for its first multi-sensor satellite cluster into low Earth orbit in 2024, working with Finnish firm ICEYE on SAR technology to be included in the Azalea cluster.

“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,” said Woodburn.

 “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.”

The deal allows Ball to focus on its more profitable aluminium business, says Fisher.  “Executing our strategy of enabling the greater use of circular aluminium packaging on a global scale continues,” he said.

“Our acceleration of low-carbon, best-value aluminium packaging initiatives in the years to come will stimulate organic growth across our global packaging operations and improve the world for future generations. Our innovative portfolio of aluminium cans, bottles and cups for single-serve, refill, reuse and recloseable applications has untapped potential, and we look forward to unlocking that value and delivering sustainable compounding shareholder growth now and beyond.”

Completion is subject to customary regulatory approvals and conditions with a targeted completion date in the first half of 2024, with a termination fee of US$100m payable in the event the transaction is terminated.;


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