Bankinter | General Dynamics closes the door to the acquisition of its Spanish subsidiary (Santa Bárbara Sistemas) after presenting its 2030 strategic plan.
Indra (IDR) expressed three months ago its interest in buying Santa Bárbara Sistemas. However, Santa Bárbara Sistemas is owned by General Dynamics, which yesterday presented its strategic plan in Spain: “Industrial and Technological Plan 2025-2030”. The main points are to increase the production capacity of ground vehicles, expanding its presence in new regions such as Aragon, Catalonia and the Basque Country in order to become the leading company for armoured ground vehicles in Spain. One of the pillars of the strategic plan revolves around the 8×8, an armoured vehicle manufactured by Tess Defense (controlled by Indra; 51% of the capital and in which General Dynamics has a significant stake; ca. 17%).
Bankinter analysis team’s view: Bad news for Indra, as the General Dynamics-Santa Barbara strategic plan closes the door to a possible acquisition of Santa Barbara by Indra. This would mean that of the 565 vehicles that Santa Barbara plans to manufacture by 2030, Indra would only capture the revenues from the 8×8 that Tess Defence manufactures, in which it has a 51% stake.
If Indra had completed the acquisition, it would have increased its industrial capacity, participation in Tess Defense and synergies with other business lines, since Indra integrates, among others, the 8×8 sensors. Therefore, by not completing the operation, competition in the defence sector in Spain increases and Santa Bárbara would become the leading company in the development of armoured land vehicles.
Despite the bad news, we confirm our Buy recommendation on Indra (P.O. €36.8), as we believe it will continue to benefit from:
(i) the structural increase in defence spending by European governments (including Spain, which is expected to increase defence spending to 2% of GDP or higher) as a result of a more uncertain geopolitical environment (Russia/Ukraine conflict, Trump administration…).
And (ii) greater weight in Indra’s business model of the defence segment in the medium term, which presents more dynamic sales growth rates than the rest of the divisions and higher margins. Moreover, it is the European company trading at lower valuation multiples: PER26e 16.6x (versus 30.8x sector average), EV/EBITDA26e 8.0x (versus 15.9x). Indra is part of our Spanish 5-stock model portfolio and our thematic defence portfolio.
