Acquisition

RNS Number : 9718Z

BAE SYSTEMS PLC

28 July 2008

 



BAE Systems - proposed acquisition of Detica Group plc

28 July 2008

BAE Systems has today announced a recommended offer to acquire Detica Group plc (Detica), a provider of information management capabilities to the National Security and Resilience (NS&R) sector. The offer to acquire the entire issued share capital of Detica for 440 pence per share in cash values the business at approximately £538 million including assumed net debt.

For the twelve month period ended 31 March 2008, Detica generated EBITA (before exceptional items) of approximately £27 million on sales of approximately £203 million. Detica employs approximately 1,500 people.

Detica is a high growth business. The company has achieved compound annual growth of 39 per cent. and 25 per cent. in revenues and diluted adjusted earnings per share, respectively, over the past five years.

BAE Systems has identified NS&R as an evolving and growing sector benefiting from increasing priority government attention. A strategic objective of BAE Systems is to establish security businesses in its home markets. While BAE Systems has been developing plans for substantial organic investment to pursue growth NS&R opportunities in these markets, the proposed acquisition of Detica provides an economically attractive and accelerated implementation of its strategy to address these opportunities. 

BAE Systems expects the historically fragmented NS&R sector to consolidate and grow as customers' requirements evolve around more integrated information management solutions.  The combination of Detica's well established customer relationships and technical capabilities together with BAE Systems' system integration capabilities will result in a depth of financial and technical capability to address growth opportunities and better serve customers in the NS&R sector.

BAE Systems expects the accessible NS&R sector in the UK to double to over £3bn by 2011. In addition, BAE Systems' broad geographic footprint provides substantial opportunities to grow NS&R business across its other home markets.  In particular, BAE Systems' existing activities and structure will provide a platform to apply Detica's capabilities into the US Homeland Security market.

The business combination is expected to benefit from strong growth, consistent with the anticipated growth in the sector, and from cost synergies including benefits from more efficient internal investment. These benefits are expected to enable the acquisition to achieve a return in excess of our cost of capital in the third full-year following completion.

It is BAE Systems' intention to finance the transaction from existing cash resources. 

The offer of 440 pence per share represents a premium of approximately 57 per cent. relative to the closing price of 281 pence per Detica share on 17 July 2008 (being the last business day prior to the announcement by Detica that it had received a preliminary approach which may or may not lead to an offer being made for Detica) and a multiple of approximately 34.1 times Detica's diluted earnings per share of 12.9 pence for the year ended 31 March 2008.

Under the terms of the proposed transaction Detica shareholders will remain entitled to receive the proposed final dividend in respect of the year ended 31 March 2008 of 2.5 pence per share, which was announced on 2 June 2008 and which, subject to it being approved by Detica shareholders at the Detica Annual General Meeting, will be payable on 8 August 2008.

The offer is subject to sufficient acceptances being received from Detica shareholders and is conditional upon certain regulatory clearances. 

The proposed transaction is expected to complete later this year.  

Issued by:

BAE Systems plc

London

 

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