BAE Systems considers sale of US consultancy unit

BAE Systems is weighing up a potential sale of its US consultancy division after being approached by potential bidders, Britain's biggest defence company said on Friday.

The division - which consists of 9,000 people who advise US government agencies on IT, operations and warfare, and help the military accomplish its missions - generates about £1bn in annual revenue for BAE.

Any sale would be consistent with BAE's strategy of increasing its focus on selling products to the private sector after cuts in defence spending by western governments.

BAE has appointed Stone Key Partners and Morgan Stanley as strategic advisers for a review of the three businesses that form part of its US consultancy division: global analysis and operations; global IT solutions; and integrated electronics and warfare systems.

BAE's shares rose 2.3 per cent to close at 515p on Friday.

The company has been hit by several years of cuts in defence spending by the US, which is BAE's most important market by revenue, generating almost £6bn in sales last year.

It also faces uncertainty in the UK, BAE's second most important market, in the run-up to the May general election - because of the risk the next government could squeeze defence spending.

BAE stressed that although it was exploring a sale of its US consultancy division after interest from potential buyers, there was no certainty a disposal would go ahead.

"BAE Systems regularly reviews its business portfolio and operations to remain optimally aligned with key markets and to maximise value for customers and shareholders," the company said.

One analyst claimed the US consultancy division had been a disappointment to BAE because it had not generated enough profit.

"There's quite a lot of egg on BAE's face," the analyst said. "They puffed this business . . . it has not got particularly high margins and is not a very high quality business."

BAE's US consultancy division would sit better with companies that specialised in outsourcing and facilities management, the analyst added.

In February, BAE reported underlying earnings before interest, tax and amortisation of £1.7bn for 2014, down almost 12 per cent compared with 2013. Sales fell 8.5 per cent to £16.6bn.

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