Acquisition

BAE SYSTEMS PLC
18 January 2008


18/1/08

BAE Systems announces agreement to acquire Tenix Defence

BAE Systems has today entered into an agreement to acquire the companies
comprising Tenix Defence, a leading Australian defence contractor, for up to
A$775 million (£356 million) in cash.

Tenix Defence comprises four wholly owned businesses and two joint venture
interests. Terms have been agreed to acquire the wholly owned business for A$686
million (£315 million). Subject to pre-emption rights not being exercised, the
joint venture interests will form the remainder of the transaction. Tenix
Defence divisions comprise:

•   Tenix Land: a leading military vehicle supplier and provider of through life 
    support to the Australian Defence Force with an additional presence in 
    defence services


•   Tenix Aerospace: a provider of systems integration, modification and support 
    activities, including through-life support, across a number of major 
    aircraft platforms


•   Tenix Electronic Systems: an information and defence electronics business 
    with a core capability in technology and subsystems development


•   Tenix Marine: a leading provider of maritime acquisition and support 
    programmes in Australia, New Zealand and the South East Asian region

The two joint ventures are RLM, with Lockheed Martin, which provides ongoing
system upgrade, maintenance and support services for the Jindalee Operational
Radar Network and Tenix Toll Defence Logistics, with Toll Logistics, which
manages warehousing, engineering, distribution and maintenance activities for
the Australian Defence Force.

Tenix Defence will be integrated with the operations of BAE Systems Australia,
headquartered in Adelaide.

The acquisition of Tenix Defence more than doubles BAE Systems' presence in
Australia making it the largest in-country defence supplier to the Australian
Defence Force. With over 5,500 people and annual sales of over A$1.2 billion
(£550 million) the company will deliver enhanced capabilities in the Land, Sea,
Air and Joint domains. The organisations are an excellent fit and have largely
complementary programmes and capabilities.

The acquisition of Tenix Defence is a significant step in the implementation of
BAE Systems' strategy to develop as the premier global defence and aerospace
company.  Australia is one of BAE Systems' six home markets and has attractive
prospects arising from the Australian Government's commitment to increase
defence spending by 3% per annum in real terms until 2015-16 and its preference
to maintain a strong national defence capability.

For the twelve month period ended 30 June 2007, Tenix Defence generated proforma
EBITDA of A$56 million (£26 million) on sales of A$699 million (£321 million).


The proposed acquisition is expected to deliver a return in excess of BAE
Systems' cost of capital in the first full year following the proposed
acquisition.

Commenting on the proposed acquisition, Mike Turner, Chief Executive of BAE
Systems, said:  'I am delighted that we have agreed to acquire Tenix Defence,
which will transform our business in Australia.'

Jim McDowell, Chief Executive of BAE Systems Australia, added: 'This
transaction significantly enhances the depth and breadth of our capabilities in
Australia and adds a major naval business to our portfolio and significantly
increases our land capability. The combination of the two companies will enable
us better to equip and support the Australian Defence Force for many years to
come.'

The purchase consideration is subject to customary post completion adjustments.
Completion is conditional upon certain regulatory clearances, other third party
consents and final verification of certain matters and is expected in the first
half of 2008.

BAE Systems has been advised in this transaction by Lehman Brothers.


Notes

(1) All numbers included in this announcement assume that the joint ventures 
    form part of the transaction.

(2) An exchange rate of £1 : A$2.18 has been applied in this announcement.


Issued by:

BAE Systems plc

London


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