BAE Systems Hires Advisors To Sell Part of Defense Group

(Reuters) – British defense group BAE Systems (BAES.L) has hired advisors to sell some of its U.S. component manufacturing businesses as it looks to shift its focus to support and maintenance operations.

“BAE Systems confirms that it has engaged Wells Fargo (WFC.N) and JP Morgan to advise on strategic options with regard to the Platform Solutions business, including a possible sale,” the company said in a statement on Monday.

Sources told Reuters on Saturday that BAE was looking to sell part of its North American commercial aerospace business in an auction that could generate up to $2 billion.

Shares in BAE, which have fallen 10 percent in 2010, were up 0.96 percent at 326 pence by 4:50 a.m. ET, valuing the group at around 11 billion pounds ($17 billion). The FTSE All Share index was up 0.8 percent.

Platform Solutions, which makes electronic components such as cockpit displays for military jets and digital engine controls for commercial aircraft, is seen as non-core to BAE.

“It’s a sensible policy by BAE to clean up their act and move forward into areas they would rather be in — BAE is adapting to changing circumstances,” said BGC Partners analyst Howard Wheeldon.

“Bidders would most likely be U.S. companies given that much of the businesses are in North America.”

U.S. aerospace suppliers Goodrich Corp (GR.N), Rockwell Collins Inc (COL.N), Woodward Governor Co (WGOV.O) and Moog Inc (MOGa.N) have been touted as possible bidders, along with U.S. diversified manufacturer Honeywell International Inc (HON.N).

Private-equity firms, such as Carlyle Group CYL.UL, Warburg Pincus and Greenbriar Equity Group LLC could also be keen, sources said.


BAE, Europe’s largest arms contractor, aims to grow its customer support and services business, which covers readiness, sustainment, cyber and security, to offset expected cuts in UK defense procurement programs.

Customer support and maintenance accounts for around 40 percent of its business but Chief Executive Ian King wants BAE to expand that in the coming years.

Britain is reviewing its defense budget as part of a broader move to cut a record peacetime budget deficit, details of which will be unveiled on October 20.

Analysts believe a review of defense needs will lead to cuts of up to 15 percent in the defense budget — 36.9 billion pounds for the current financial year — with big procurement programs set to be scaled back.

BAE boosted its maintenance operations in May with the $352 million purchase of U.S. ship repair group Atlantic Marine.

BAE’s Platform Solutions business, which also produces electrical components for hybrid buses, employs 4,200 people at sites worldwide and is part of BAE’s Electronic, Intelligence and Support (EI&S) division.

The business has a base in Kent, south England which employs 1,500 staff.

“There can be no certainty that any transaction with respect to the Platform Solutions business will occur,” BAE said.

The defense group last week announced plans to cut 740 jobs at its UK military aerospace business.