BAE Systems confirms potential £1.3bn sale

BAE Systems yesterday confirmed it was considering the sale of a North American business in a move that could net £1.3bn for the defence giant.

The group has hired JP Morgan Chase and Wells Fargo to advise it on options for the Platform Solutions unit, which makes electronic components for the commercial and defence sectors, including cockpit displays for fighter jets and digital engine controls for commercial aircraft.

It is also a leading producer of components for low-emission hybrid buses.

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BAE said options under review included the sale of the business, which employs around 4,200 people worldwide.

The move to offload the business, which does not represent a core part of the group, comes as BAE prepares itself for looming Government cuts to the defence budget.

Last week it announced plans to axe nearly 1,000 jobs in the UK following changes to the defence programme announced last year.

It has also been reported that chief executive Ian King wants to build a war chest for acquisitions ahead of an expected consolidation of the American defence sector. The Platform Solutions business, which is part of BAE's Electronic Intelligence and Support division, operates from a number of sites in the United States, although there is also a site in Rochester, Kent.

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It generated annual earnings of 202 million US dollars (130m), before interest, tax, depreciation and amortisation, last year.

Potential buyers are thought to include industrial groups such as Rockwell Collins and Woodward Governor, as well as private equity firms, including Warburg Pincus and Carlyle Group.

Other potential suitors may include avionics firm Moog, and its rivals Honeywell and Hamilton Sundstrand.

Reports have suggested that a sale of the business could yield around 2 billion US dollars (1.3bn). BAE is understood to want to sell the business as a single entity, although it may consider breaking it up if it can get a higher price this way.

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In February, BAE agreed to pay 278m in fines and plead guilty to two charges after a probe into its activities in several countries by the US Department of Justice and the Serious Fraud Office. The group saw its operating profits for 2009 slump to 982m from 1.72bn the previous year, due to the loss of a key US contract and the fines relating to bribery allegations.

It warned that while it expects growth this year, it is steeling itself for belt-tightening measures in the face of defence budgets in both the UK and the US.

Shares closed up 3 per cent at 333.1p

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