BAE Systems said on Tuesday it would help fund its $4.1bn purchase of Humvee maker Armor Holdings with a £750m share placing.
Hoare Govett and UBS are handling the cash call, which is being priced through an accelerated bookbuilding exercise. The new stock represents about 5.9 per cent of BAE’s issued share capital.
Shares in the British defence group dipped 4p to 442p at the opening of trade in London.
The Armor takeover is expected to increase US congressional scrutiny of BAE, especially in light of the recent decision in Britain to abandon a corruption enquiry by the Serious Fraud Office over the company’s dealings with Saudi Arabia.
But, as Andrew Hill points out in his Lombard column, the real question is whether there has been a change in US attitudes to foreign acquisitions in sensitive areas.
“The Pentagon – BAE’s chief client – remains on good terms. Congress also seems to have calmed down since the DP World backlash. The Democrats no longer need to prove a political point, and vocal opponents of the DP World deal have made soothing noises about the proposed purchase of a US aviation maintenance business by a state-owned Dubai company.
“BAE does not seem to have irritated its big American rivals with the Armor deal, reducing the chance that they will lobby aggressively against it. But Britain’s burying of the bribery probe remains sensitive in Washington. BAE claims the decision has had no impact on how the UK company is treated in its biggest market. The Armor acquisition should prove – one way or the other – whether that is the case.”