BAE secures a deal with Saudi Arabia over jets
DEFENCE gaint BAE Systems yesterday said it had agreed pricing with Saudi Arabia on a long-awaited jets deal.
FTSE 100-listed BAE Systems said that the UK and Saudi governments have now agreed price escalation terms relating to the Typhoon aircraft under the so-called Salam deal and that the terms of the agreement are broadly consistent with the firm’s prior trading outlook for 2013.
A cash settlement is expected to follow the pricing agreement, starting in the early part of 2014.
“This is an equitable outcome for all parties,” said chief executive Ian King.
“I am pleased that we have been able to conclude this negotiation which builds on our long standing relationship with this much valued customer.”
BAE Systems had to lower its full-year earnings guidance for the past two years after it failed to agree on a price for the 72 Typhoon aircraft it said it would sell to Saudi Arabia back in 2007. The deal at the time was worth around £4.5bn.
“[This pricing agreement] allows BAE to recognise current and historic profit and contractually entitles them to the cash profit not yet paid,” said Cantor Fitzgerald research. “In turn this will help fund the continuation of its buy-back programme.”
BAE Systems launched a £1bn share buyback programme this month, dependant on the finalisation of the Salam deal.
Shares closed down 0.18 per cent.