BAE in £226m takeover of MTC

BAE Systems, the leading European defence group, is expanding its presence in the US through the takeover of MTC Technologies in a deal valued at $450m (£226m), including the assumption of debt.

MTC is a provider of technical, professional and logistics services to the US defence department and intelligence agencies and is ranked among the fastest-growing US defence technology companies.

MTC said it had signed a definitive merger agreement to be acquired by BAE for a cash price of $24 a share plus debt.

The share price of the Nasdaq-traded group closed 73 cents higher on Friday at $17.78. BAE will make a statement on the deal today to the London Stock Exchange.

The transaction is expected to close in the first half of 2008, subject to backing by MTC shareholders and regulatory approval.

MTC has its headquarters in Dayton, Ohio, and employs about 3,000 staff.

Raj Soin, chairman and chief executive of MTC, said the deal would provide MTC with “expanded market opportunities”.

BAE has been rapidly expanding in the US, the world’s largest and most lucrative defence market, and has become the sixth-largest supplier to the US defence department. Last June, the Bush administration approved BAE’s $4.1bn takeover of Armor Holdings, a US armoured vehicle maker.

Its ability to continue making acquisitions in the US appears to have been unimpaired to date by the investigation by the US Department of Justice into the group’s alleged bribery of Saudi Arabian officials in connection with its Al Yamamah contract, including the supply of Tornado fighter jets to Saudi Arabia.

The UK scrapped its own high-profile arms industry anti-corruption probe a year ago in a move that caused an outcry and was widely seen as undermining global efforts to combat bribery.

It led the US to issue the UK with a formal diplomatic rebuke and the US then launched its own investigation into the case, which centres on allegations that Prince Bandar bin Sultan, Saudi Arabia’s former ambassador to Washington, received more than £1bn of payments from BAE in connection with the £43bn Al Yamamah arms deal. Both Prince Bandar and BAE have denied wrongdoing.