EnerSys buys Bren-Tronics as Defense Spending Booms

As global defense spending surges to all-time highs, military battery manufacturer Bren-Tronics announced that it will be acquired by EnerSys (NYSE: ENS) for $208 million. The all-cash deal is structured as a stock purchase and is expected to close this quarter.

“The acquisition of Bren-Tronics is a strategic move that will strengthen our position as a critical enabler of the energy transition and supports our growth in the attractive and growing military and defense end market,” states EnerSys President & CEO David M. Shaffer the deal’s press release. “Bren-Tronics is a leading manufacturer of rechargeable batteries for the Military and several other critical markets, including Directed Energy, Robotics, and High Energy applications.”

Global arms sales have boomed, with major ongoing conflicts in Ukraine, the Middle East, and other regions across the globe driving demand. Military expenditures surged 6.8% in 2023, to reach an all-time high of over $2.4 trillion globally. This represents the largest increase since 2009, with the ten largest spenders all increasing their spending last year, led by the United States, China, and Russia.

Source: Statista

The United States continues to dominate military spending and exports. At $916 billion, the U.S.’s spending in 2023 represented 68% of all NATO spending, even as European members have increased their spending level’s since Russia’s invasion of Ukraine. The U.S. has also increased its global share of arms exports, accounting for 40% over 2018-2022, up from 33% over 2013-2017.

Source: Axios

According to DealPulse’s M&A database, which harnesses both AI and attorneys to digest the granular deal points of publicly-announced transactions over $25 million in value, just under 23% of deals over the past 5 years are structured as stock purchases. This trails the more popular structures of public and private target mergers, but remains more prevalent than asset purchases. Sellers prefer stock purchases because the gain from the transaction is typically taxed at the capital gains rate, especially when the purchase price is in cash – as it is in this deal. Further, the buyer typically must assume the liabilities, both known and unknown, of the acquired company.

Deal Structure Prevalence, US Deals over past 5 years

Source: DealPulse

This deal includes an indemnity cap of $10.4 million, which represents 5% of deal value, as compared to the median indemnity cap of 9.86% across all deals monitored since 2007.

Bren-Tronics is advised by law firms Meister Seelig & Fein PLLC and Moritt Hock & Hamroff LLP, as well as financial advisor Bigelow LLC. EnerSys is advised by Reed Smith LLP and financial adviser Stout.