BAE Systems seeks electronics, cyber buys

22 June 2011 Reuters defenseWeb

British defence firm BAE Systems is looking for acquisitions in the electronics, cyber security and intelligence fields to reinforce the company's growth strategy, chairman Dick Olver told Reuters yesterday.

He also said BAE, Europe's biggest defence contractor, was trying to boost its land, air and security business in India, and saw great demand for naval systems in Brazil.

"We are always scanning and looking at opportunities where we can reinforce the good bits of business which are in line with our strategy -- the strategy being to increase our services businesses, to grow our electronics business, and our cyber and intelligence business, which is probably capable of growing in strong single digits," he said.

Olver said no set sum had been set aside for purchases, and that the companies they were looking for tended to be very highly priced. However, he said BAE's balance sheet was "very strong, which gives us the flexibility to think about capital allocation in several directions".

The United States, Britain and other countries in the West are trimming defence spending to tackle budget deficits, prompting defence firms to boost their business in emerging economies that are spending more on their militaries.

"We have a very important security business, and that business is also having conversations in India, so I think what you'll see us doing is using our competitive advantage, particularly in land and air, and in security," he said.

The company's security arm handles cyber security and intelligence.

Olver said BAE would like to engage Brazil in the production of the company's Type 26 frigate.

"Brazil is a very interesting area. I think probably right at the front of discussions in Brazil is more likely to be naval systems. There is a great demand for naval ships in Brazil," he said.

"Type 26 is the global combat surface ship. It's a really interesting idea, and we would like to engage the Brazilians in that," he added.

BAE is in talks with a number of other countries on the project, with the aim of creating a flexible ship that is easily adaptable to different countries' needs and therefore easier to export.

The company said in February that it expected a fall in activity in its land and armaments units, which makes armoured vehicles and artillery, to dent its 2011 sales, and that this would force cost savings and efficiencies.

BAE has shed 15,000 jobs in the last two years and has also sold some businesses, but Olver gave no details of further job cuts or divestments, saying only that spending to boost skills and research and development would help boost efficiency.