BAE Systems may sell part of its U.S. intel biz

BAE Systems said on Firday it will review its U.S. intelligence and IT operations because of significant external interest. The government-facing units, which fall within the London-based company’s U.S. Intelligence and Security division, generated annual revenue of about $1.7 billion last year, reports Bloomberg. Government intelligence agencies recruit the divisions to support counter-terrorism missions and assist identifying and managing other threats, the company said in its annual report. BAE is among the largest U.S. defense contractors, a business it runs as a wholly separate entity to comply with security clearance. The company has largely refrained from disposals and acquisitions in recent years after a planned merger with Airbus Group NV fell through in 2012.

The units “have generated external interest and a number of enquiries,” the company said in a statement. “As a result, BAE Systems has engaged external advisers to support a strategic assessment of these businesses.” Morgan Stanley has been hired in the U.K. for the asset review, with Stone Key Partners managing the review in the U.S., a spokesman said.

"It doesn't signal a change of strategy, it is just the continual process of review and in this case something that has been triggered by an approach," said analyst Edward Stacey at Espirito Santo Investment Bank, according to Reuters. "The upside is that it shows that they are willing to be proactive" he said, adding a share buyback could be a possibility for the firm, whose profits have been hit in recent years by government spending cuts.

The changes would complete a transition begun last year, when incoming President & CEO Gerard (Jerry) DeMuro eliminated an under-performing business sector focused mainly on services, writes Forbes. Its activities were folded into the three surviving units, but with today’s announcement from London, the company is signaling that the only services businesses it wants to retain are those associated with the support and modification of complex combat systems such as warships.