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BAE Systems is poised to buy Collins Aerospace’s GPS business and Raytheon’s Airborne Tactical Radios business as part of a deal worth more than $2bn following the businesses’ divestment to get the Raytheon-UTC merger approved.

Under the definitive Asset Purchase Agreement, BAE Systems is set to acquire Collins Aerospace’s Military Global Positioning System business for $1.925bn cash and Raytheon’s Airborne Tactical Radios business for $275m. The deal, however, is pending the completion of the merger of Raytheon and United Technologies (UTC) – which owns Collins Aerospace.

BAE Systems said the merger presented the company a ‘unique opportunity’ to acquire leading businesses in their fields. The GPS and Radio businesses are on the market as they had to be divested as part of the US regulatory process surrounding the ongoing Raytheon-UTC merger.

The company plans to fold the GPS and Radio divisions into its well-positioned Electronic Systems division, which produces systems for both commercial and defence customers.

BAE Systems chief executive Charles Woodburn said: “These proposed acquisitions present a unique opportunity to add high-quality, technology-focused businesses to our Electronic Systems sector. It’s rare that two businesses of this quality, with such strong growth prospects and close fit to our portfolio, become available.

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“The strategic and financial rationale is strong and these proposed acquisitions, which are focused on areas of highest priority defence spending, will further enhance the group’s opportunity for continued growth in Electronic Systems. We look forward to welcoming the employees of the two businesses to the company, as we work together to help drive our business forward successfully.”

Collins’ military GPS business is a well-established player in the field with its technology installed on around 280 different systems across ground, air and other domains, with BAE Systems describing the business as ‘highly complementary’ to its existing Electronic Systems division.

In a press release, BAE Systems wrote: “The business operates across a broad base of customers and platforms and is well-positioned in the highly attractive, US-focused defence electronics and weapon systems end markets.

“The GPS business has fielded over 1.5 million units and currently has a presence on over 200 ground, 40 airborne and 40 weapons platforms and is a key provider on the two highest volume weapons programmes for the US Air Force.”

BAE Systems says it plans to integrate the GPS business and its staff into Electronic Systems. Collins GPS business is expected to achieve revenue of $359m in 2020, with the company expected to continue growing post-acquisition.

BAE Systems describes Raytheon’s Airborne Tactical Radios business as a “strong strategic fit” and says it will give BAE a “certified indigenous encryption capability” bolstering its secure communications business. Like Collins’ GPS business, the Raytheon subdivisions premises and staff are set to be folded in BAE’s Electronic Systems division.

Commenting on the Raytheon acquisition BAE Systems said: “The Radios business is expected to generate revenue of approximately $125m in 2019 and has strong growth potential underpinned by US Department of Defense and NATO mandates for cryptographic and anti-jamming modernisation of software-defined radios. The proposed acquisition is expected to be immediately earnings and cash flow accretive, and achieve a return on invested capital in excess of cost of capital in the first full year post-completion.”