Ford Aerospace to Pay $425 Million for SDI Contractor
Ford Aerospace, Ford Motor’s defense subsidiary with a facility in Newport Beach, said Tuesday it has agreed to pay $425 million to buy BDM International, a Virginia-based defense contractor involved in research for the “Star Wars” anti-missile program and a wide range of other Pentagon projects.
Ford--sitting on about $10 billion in cash, thanks to the recovery of its automotive operations--has been looking for companies to buy for months. Many observers believe a huge acquisition is in the offing.
Although BDM, based in the Washington suburb of McLean, Va., has 3,700 employees and had sales of $300 million last year, it makes no weapons or other defense hardware. It supplies professional and technical services in the early development stages of new defense programs.
James Hughes, a BDM senior vice president, said Star Wars-related contracts provide 10% to 20% of revenue for the firm, whose stock is traded on the American Stock Exchange. Ford Aerospace will pay $34.75 a share for BDM’s common stock, which closed Tuesday at $34.375, up $3.75.
Last year, Ford Aerospace announced plans to relocate its corporate offices from Detroit to Newport Beach and Washington. The company, which already has a major manufacturing facility in Newport Beach, expects to move into its administrative offices there this summer.
Ford officials said when they bought BDM they were basically buying its talent pool. “They are strong in the early phases of research and development,” noted Susan Pearce, a Ford Aerospace spokeswoman. “We are buying the talent and expertise. And we think this will let us go after larger projects that we couldn’t go after without them.”
Pearce said both Ford Aerospace and BDM are already involved in Strategic Defense Initiative, or Star Wars, research, particularly in aspects of battle-management command and control systems.
Ford was awarded $1.3 billion in federal contracts last year, while BDM was awarded $400 million, the companies said.
Defense industry analysts said defense hardware makers like Ford Aerospace have increasingly been moving into professional and technical services to provide balance to their manufacturing work.
“To buy a professional services company is a good strategic move,” said Susan Pitts, an analyst with the Baltimore-based investment firm of Alex. Brown & Sons.
“There has been very fast growth in the demand for these services firms, and they tend to work on cost-plus contracts, so they don’t have much income volatility. And, since they are in on the early stages of development, they can give companies insight into future trends in defense programs.”
Pitts also said BDM, one of the largest professional-services firms in the defense industry, was attractive to Ford for its diversity. While SDI is a large component of its business, the company has more than 800 different contracts, so it is not likely to get hurt by cutbacks in any one area of the defense industry.
