Ford Aerospace to Buy Defense Research Firm : Company Says It’s Paying for BDM’s Talent Pool

DETROIT — Ford Aerospace, Ford Motor’s defense subsidiary, said Tuesday that 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 remarkable recovery of its automotive operations, has been on the lookout 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. Instead, it supplies professional and technical services in the early development stages of new defense programs.

Between 10% and 20% of the revenues of the firm, whose stock is traded on the American Stock Exchange, come from Star Wars-related contracts, according to James Hughes, a BDM senior vice president. Ford Aerospace will pay $34.75 a share for BDM’s common stock, which closed Tuesday at $34.375, up $3.75.

Technical Services

Ford officials said that when they bought BDM they basically were 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 Star Wars research, particularly in different aspects of battle management command and control systems.

Ford was awarded a total of $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 the professional and technical services area 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 that BDM, one of the largest professional services firms in the defense industry, was attractive to Ford for its diversity. While Star Wars 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 establishment.