Exclusive-PE firms, defense companies vie for Ball Corp's aerospace unit -sources

By David Carnevali and Mike Stone

NEW YORK (Reuters) - Private equity firms Blackstone (NYSE:BX) Inc and Veritas Capital Fund Management LLC are competing against large defense companies to acquire the aerospace business of Ball Corp (NYSE:BALL), according to people familiar with the matter.

Defense firms BAE Systems (OTC:BAESF), General Dynamics Corp (NYSE:GD) and Textron Inc (NYSE:TXT) have also expressed interest in the business, which could be worth over $5 billion, the sources said.

The unit, which accounted for 13% of Ball's consolidated net sales in 2022, provides aerospace and national defense hardware, such as sensors and antennas.

Ball is expected to invite final bids for the unit by the end of July, the sources said, requesting anonymity as these discussions are confidential.

In June, Ball said it was considering options for its aerospace unit, after Reuters reported on the sale process. Ball, the world's largest supplier of beer cans, is looking to divest the unit to focus more on its beverage packaging operations and trim its debt pile of about $9.7 billion.

Blackstone and Veritas are no strangers to the aerospace sector. Blackstone owns Arka Group, an aerospace and defense technologies firm whose clients include the U.S. military, while Veritas owns companies including CAES Space Systems, which is a supplier of advanced electronic systems for aerospace and defense.

Blackstone, Veritas and Bae Systems declined to comment. Ball, Textron, and General Dynamics did not respond to requests for comment.

Ball established its aerospace division in the 1950s. It flourished to become a key contractor in areas such as earth science, aerial exploration and national security and intelligence programs.

Ball's move to divest its aerospace operations comes at a time when dealmaking in the defense sector faces increased regulatory scrutiny.

Last year, defense contractor Lockheed Martin Corp (NYSE:LMT) abandoned its proposed deal to buy Aerojet Rocketdyne Holdings (NYSE:AJRD) Inc after U.S. regulators sued to block it. Aerojet is now trying to convince regulators to green-light its sale to L3Harris Technologies (NYSE:LHX) Inc.

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Ball's aerospace business has been generating steady albeit limited cash flow for Ball, accounting for $170 million out of its $1.45 billion in comparable operating earnings in 2022.

Ball could incur a hefty tax bill of over $1 billion if the aerospace unit is sold for $5 billion or more, according to analysts at Jefferies.