TLDR
- Norway selects UK for new Type 26 frigate purchase, described as the country’s largest military acquisition in history
- BAE Systems stock rises following the announcement of the partnership deal with deliveries starting in 2030
- The agreement involves joint acquisition for British and Norwegian navies with matching technical specifications
- BAE Systems shares currently trading 12% below June highs despite strong financial performance and upgraded forecasts
- Industrial cooperation commitment includes British guarantee of collaboration with Norwegian industry equal to full contract value
BAE Systems received a boost on Monday as Norway announced its selection of the United Kingdom to supply new Type 26 frigates. The deal represents the largest military acquisition in Norwegian history.
Prime Minister Jonas Gahr Støre revealed the decision on Sunday. He stated the partnership with the UK provides Norway the best foundation for meeting defense goals approved by parliament.
The selection came after months of evaluation. Norwegian authorities considered proposals from France, Germany, the United States and the UK before making their choice.
Støre acknowledged the difficulty of the decision. He noted that all four allies offered competitive options but emphasized that the Chief of Defence had recommended the UK option.
The agreement involves joint acquisition of Type 26 frigates for both British and Norwegian navies. Officials designed the partnership to include matching technical specifications across both fleets.
Defense Minister Tore O. Sandvik highlighted the compatibility benefits. He said the matching specifications will reduce costs and could allow Norwegian and British crews to serve interchangeably.
Deliveries are scheduled to begin in 2030. The frigates will carry anti-submarine helicopters, though authorities have not yet decided on the specific model.
The vessels are designed primarily for submarine detection and combat. Each Type 26 frigate weighs 7,600 tons and measures 151.4 meters in length.
The ships feature a maximum speed above 26 knots. They also boast a range of more than 7,000 nautical miles.
Industrial Cooperation Framework
The partnership includes a commitment to industrial cooperation between both nations. British authorities have guaranteed collaboration with Norwegian industry equal to the full contract value.
Støre said Norwegian companies will play a major role in maintaining and updating the vessels. Both sides have identified potential areas for technological and industrial cooperation.
Norway and the UK are expected to finalize a binding intergovernmental agreement soon. Once signed, both governments will enter contract talks with BAE Systems to determine pricing and delivery schedules.
The frigates will carry crews of about 166 people. They have capacity for up to 208 personnel when needed.
Current Stock Performance
BAE Systems shares have declined 12% from their June 5 high of £19.98. The stock currently trades at £17.54 despite strong underlying business performance.
Recent financial results show continued strength. The company’s first-half earnings jumped 13% year-on-year to £1.55bn, while sales increased 11% to £14.621bn.
BAE Systems upgraded its performance forecasts following these results. The company now expects earnings growth of 9-11% this year, up from previous guidance of 8-10%.
Sales growth projections also increased to 8-10% from the earlier forecast of 7-9%. Consensus analyst forecasts predict earnings growth of 11.3% annually through end-2027.
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