Business

BAE Systems will keep Collins Aerospace's military GPS business in Cedar Rapids area following $2 billion deal

BAE Systems, an international defense, aerospace and security company, says it will acquire Collins Aerospace's military
BAE Systems, an international defense, aerospace and security company, says it will acquire Collins Aerospace’s military GPS business for $1.9 billion. (Liz Martin/The Gazette)

CEDAR RAPIDS — United Technologies Corp. will sell Collins Aerospace’s military GPS business to United Kingdom-based BAE Systems, which plans to establish a presence in the Cedar Rapids area rather than relocate hundreds of employees.

BAE Systems, an international defense, aerospace and security company, has entered into a purchase agreement to acquire the GPS business for $1.925 billion, it announced Monday morning.

The two acquisitions are conditioned on customary regulatory approvals and UTC’s completion of its $135 billion merger with Raytheon Co.

As a merger prerequisite to satisfy antitrust concerns, the U.S. Department of Justice in October asked Collins Aerospace to divest its military GPS business.

“To ensure as smooth an integration as possible, with minimal disruption, BAE Systems plans to stand up a new presence in the Cedar Rapids area to which they will transition the business over time,” Collins Aerospace spokeswoman Pam Tvrdy-Cleary said in an emailed statement Monday.

Current plans call for the military GPS business’ approximately 675 employees, based in Cedar Rapids and Coralville, to stay in their Collins Aerospace facilities until the merger closes, BAE Systems spokeswoman Caitlin Hayden told The Gazette.

Afterward, Hayden said, those workers will become employees of BAE Systems, reporting to the precision strike and sensing solutions business area of its electronic systems sector.

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BAE Systems will transition those employees to a new facility in the Cedar Rapids area, though Hayden said a specific location and time frame have not yet been determined. The company does not plan to lay off employees in integrating Collins Aerospace’s military GPS business, she said.

“This is a business that is already working really well, and we want to make sure we create the smoothest possible transition,” Hayden said.

BAE Systems will raise capital to buy the military GPS business through the issuance of long-term debt.

The company also entered a similar agreement to buy Raytheon Co.’s airborne tactical radios business in $275 million, also in cash.

Charles Woodburn, chief executive of BAE Systems, said the two businesses represent a “unique opportunity” for the U.K. company’s electronics systems sector.

“It’s rare that two businesses of this quality, with such strong growth prospects and close fit to our portfolio, become available,” he said in an investors release.

“The strategic and financial rationale is strong, and these proposed acquisitions, which are focused on areas of highest priority defense spending, will further enhance the group’s opportunity for continued growth in electronic systems.

“We look forward to welcoming the employees of the two businesses to the company, as we work together to help drive our business forward successfully.”

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BAE Systems expects to realize a combined tax benefit valued at $415 million from the two asset transactions.

For more than 40 years, Collins Aerospace’s military GPS business has designed and produced advanced, hardened and secure GPS products, including anti-jamming and anti-spoofing technologies.

The business has installed more than 1.5 million devices, on more than 200 ground, 40 airborne and 40 weapons platforms.

The military GPS business is expected to see about $359 million in revenue in 2020, after generating $254 million in total revenue during the most recent full year, ending Dec. 31, 2018.

“The GPS business will be highly complementary to our priority growth area of precision guided munitions in our electronics systems division,” BAE Systems said in a Monday investors release. “It has high growth potential as a result of its technological strength and is well positioned to participate in the next cycle of generational upgrades across its sizable installed base.”

Cedar Rapids Mayor Brad Hart said the city recognizes BAE Systems to be a “strong and well-respected international company.”

“We look forward to meeting with company leaders to provide assistance and support during this important transition,” Hart said in an email. “Cedar Rapids is highly connected to this GPS business, and we are committed to providing a continued location for these operations within our city.

“We would be proud to have such a strong global leader among the companies located in Cedar Rapids.”

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Headquartered in London and Farnborough, Hampshire, BAE Systems employs 85,800 people worldwide, including 30,500 people in the United States, according to its website.

Comments: (319) 398-8366; thomas.friestad@thegazette.com

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