BAE SYSTEMS Agrees to Acquire ALPHATECH.

ROCKVILLE, Md. -- Acquisition will expand company's capabilities in Image and Signal Processing, Intelligence Fusion, and Information-based National Security Systems

BAE Systems plc today announced that its wholly-owned U.S. subsidiary, BAE Systems North America, has entered into a definitive merger agreement to acquire ALPHATECH for a cash consideration of $88.4 million. ALPHATECH's capabilities will complement BAE Systems North America's significant presence in the system and subsystem levels in the C4ISR market, and enhance BAE Systems' position as a major provider of information-based systems, emphasizing horizontal integration and fusion.

The integration of ALPHATECH's technologies with BAE Systems North America's enterprise engineering and systems integration expertise will result in expanded capabilities to address the network centric warfare requirements of the national security and intelligence communities, particularly in the areas of Precision Engagement and Tasking, Processing, Exploitation & Dissemination (TPED).

Headquartered in Burlington, Mass., and employing 322 people, ALPHATECH specializes in image and signal processing, multi-intelligence fusion and intelligent systems for the Department of Defense and other government intelligence agencies. Founded in 1979 by faculty of the Massachusetts Institute of Technology (MIT), more than 80 percent of ALPHATECH's employees hold advanced degrees.

For the year ending December 2003, ALPHATECH recorded sales of $51 million. Revenues for the six months ending June 2004 were $32 million.

Mark Ronald, president and CEO of BAE Systems North America, said, "BAE Systems and ALPHATECH both leverage technology and value innovation. The acquisition of ALPHATECH will augment BAE Systems' capabilities in enterprise engineering, software development, and advanced geospatial technologies, supporting our mission to develop intelligence and information dominance systems, and provide our customers with superior solutions."

BAE Systems North America is a leading electronics, information systems and technology services company, and one of the largest providers of systems and services for the U.S. Department of Defense. BAE Systems North America currently employs more than 26,000 people across some 30 states, generating sales of more than $5 billion. The company designs, develops, manufactures and supports a wide range of advanced aerospace products, electronic systems and information technology for the U.S. Government and commercial customers.

Conclusion of the transaction is expected during the fourth quarter, subject to regulatory reviews and approvals and customary closing conditions.

About BAE Systems

BAE Systems is an international company engaged in the development, delivery, and support of advanced defense and aerospace systems in the air, on land, at sea, and in space. The company designs, manufactures, and supports military aircraft, surface ships, submarines, radar, avionics, communications, electronics, and guided weapon systems. It is a pioneer in technology with a heritage stretching back hundreds of years and is at the forefront of innovation, working to develop the next generation of intelligent defense systems. BAE Systems has major operations across five continents and customers in some 130 countries. The company employs more than 90,000 people and generates annual sales of approximately $20 billion through its wholly owned and joint-venture operations.