4 months ago • 2 mins
What’s going on here?
The UK’s leading defense company BAE Systems announced its biggest-ever deal on Thursday.
What does this mean?
BAE Systems is riding high, with the Russian invasion of Ukraine driving demand for its military gear to record levels. And that surge in orders has not only led BAE to up its profit predictions: it’s spurred the firm’s ambitions to grow too. See, BAE just announced that it’s buying Ball Corporation’s aerospace division for the tidy sum of $5.6 billion, winning out over investment firms and other defense names. That whopper deal will bolster BAE’s presence in the US – where it already rakes in the biggest chunk of its revenue – and see it win a Colorado-based business specializing in military and space sensors too. And as for Ball, well, this deal lets the conglomerate zero in on what it does best: being the world’s top beer can supplier.
Why should I care?
The bigger picture: Expensive arms race.
Ever since tensions escalated in Europe, governments have been splashing out on weaponry, giving the defense sector a hefty boost. And that spending spree is also sparking some big-ticket maneuvers, defying the broader dealmaking slump. Take L3Harris Technologies, for instance, which recently shelled out $5 billion for rocket engine maker Aerojet Rocketdyne – or look at Germany, which has been splashing out on air-defense systems. Put it all together, and the aerospace and defense sectors have seen the total value of deals nearing the $40 billion mark over the past year.
For markets: Underwhelming UK.
BAE has seen its stock jump more than 80% since the start of last year – but make no mistake, it’s an outlier in the UK landscape. After all, the slowpoke FTSE 100 has barely moved over that same period, and it’s even dipped so far this year. And HSBC thinks it’s likely to continue to sit out the global stock rally this year, given the country’s murky economic forecast.
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