BAE to sell 'platform solutions' operation

Defence giant BAE Systems is putting part of its North American commercial aerospace arm on the sale block for up to $2 billion (£1.3bn) to raise a warchest for acquisitions ahead of an expected consolidation in the US defence sector.

Chief executive Ian King is understood to want to extend the group's reach in America, where it is already the sixth-biggest contractor to the Pentagon, as defence spending in Britain faces being slashed in the new austerity programme.

The business to be sold is the "platform solutions" subsidiary, which includes American giant General Electric as one of its main customers. The division makes components and systems for the commercial aerospace industry, including engine control units and cockpit avionics. One part of the business makes hybrid engines for buses.

A BAE Systems spokesman declined to comment on what she called "market speculation". The auction is being overseen for the British company by American banks JP Morgan and Wells Fargo.

The news comes just days after BAE announced plans to shed 740 UK staff as the defence industry in Britain is set to come under pressure from the government's attempts to bring down the fiscal debt through massive cuts to be outlined next month.

Analysts said that both trade buyers and private equity houses were likely to be interested in the platform solutions business, which employs about 4,200, and would be one of the biggest divestments BAE has made in a decade.

It has ten bases globally, including the US, Israel and Europe, including one in Rochester, Kent, which employs 1,500. In 2009, platform solutions had sales of 789m.

One analyst commented: "It looks like the commercial sector is no longer as core to BAE's strategy as defence, and so the group is realigning to reflect that."

The businesses up for sale were largely acquired during BAE's acquisition drive in America over the past decade, with portfolios of companies picked up from the likes of Lockheed Martin and Sanders.