BAE Sells Radar Subsystems Provider to Cobham

In late December 2007, BAE Systems signed a definitive agreement to sell its Surveillance and Attack business in Lansdale, PA to Cobham Defence Electronic Systems Corporation, for $240 million on a debt and cash free basis, payable on completion. The goodwill arising on completion is an allowable tax expense with an estimated net present value of $45 million, resulting in an effective price of $195 million. For the year ended Dec 31/06, BAE’s S&A division generated revenue of $91 million, and profits of $14 million, with gross assets of about $34 million as of Sept 30/07. The effective price represents a multiple of approximately 11.1x 2006 EBITDA.

The cash transaction was expected to close in the first quarter of 2008, following receipt of regulatory approvals. That has now happened.

Lansdale’s 400 or so employees provide broadband high-power transmitter and radio frequency front-end systems for military aircraft.

EA-6B Prowler
(click to view full)

The equipment is used for communications and radar jamming, as well as radar warning. Products include high power transmitters, antennas, integrated microwave assemblies, control electronics and subsystems, which are currently used on fixed wing military platforms including the F-16 Falcon, F-18 Hornet family, EA-6B Prowler, EA-18G Growler, and on rotary military platforms such as the MH-47 SOCOM Chinooks, MH-60, and V-22 Osprey.

In its release, President Mike Heffron of BAE Systems’ Electronics & Integrated Solutions operating group explained that:

“This sale is consistent with BAE Systems’ strategy to expand as a developer and integrator of systems and de-emphasize its role as a subsystem provider.”

Meanwhile, Cobham plc explains the logic of the acquisition:

“The acquisition will accelerate Cobham’s plans to establish itself as a premier RF (radio frequency) frontend subsystem company. In addition, the Monolithic Microwave Integrated Circuit technology and antenna expertise existing within CDES, particularly within the REMEC Defense and Space business, is highly complementary and will benefit Lansdale and provide new opportunities for growth in this area. The acquisition significantly enhances Cobham’s ability to develop products that meet the large and growing worldwide market for C4IEWSR equipment (Command, Control, Communications, Computers, Intelligence, Electronic Warfare, Surveillance and Reconnaissance) while also both deepening and diversifying Cobham’s customer and platform base. Additional investment on product development, technology and marketing is planned to fully exploit the growth potential of Lansdale. It is anticipated that Lansdale will grow in line with the rest of the Sensor and Antenna Systems business over the medium term.”

Feb 25/08 UPDATE: Cobham plc announces [PDF] that the acquisition is complete, adding:

“The goodwill arising on completion is an allowable tax expense with an estimated net present value of US$45 million, resulting in an effective acquisition price of US$195 million. The unit, which is based in Lansdale, Pennsylvania, USA, has been renamed Sensor and Antenna Systems, Lansdale Inc (‘Lansdale’) and is to be integrated into Cobham’s enlarged Defence Electronic Systems Division (‘CDES’).”