Serco shares soar after £212m US defence purchase

British outsourcer Serco has expanded its North American defence business with a 295 million dollar (£212 million) deal for a US contractor.

The purchase of Whitney, Bradley & Brown (WBB), which supplies the US Department of Defence, will add an extra 20% to Serco’s defence revenue on the continent.

It adds about 1,000 members of staff and will bring savings of four million dollars (£2.9 million) a year in a few years’ time when the companies have integrated.

Most of the cost savings will come from property synergies, Serco said on Tuesday.

The announcement, which helped send shares up by more than 7% on Tuesday morning, will help Serco gain “a strong platform from which to address all major segments of the US defence services market”, the business said.

It will be funded through Serco’s current agreements with banks and will complete in the second quarter of this year, barring any objections from regulators.

“Growing the scale, reach and capability of Serco in the largest defence market in the world is one of our strategic objectives and the acquisition of WBB significantly advances that strategy,” said Serco chief executive Rupert Soames.

“WBB takes our North American defence revenues to around 1.1 billion dollars and gives us credible positions in other parts of the market including Air Force, Space Force, Army, the Missile Defence Agency and the Office of the Secretary of Defence.

“It creates a powerful platform for future growth and brings us impressive new capabilities in areas such as advanced data analytics, AI & machine learning and precision navigation and timing, along with a team of renowned subject matter experts covering a wide range of disciplines that can be deployed across our business.”

During the 2021 calendar year, WBB is expected to bring in 230 million dollars (£168 million) in revenue.

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