Britain’s biggest weapons manufacturer, BAE Systems, has agreed to buy the US space technology company Ball Aerospace for $5.6bn (£4.4bn), in one of the largest takeovers by a UK company this year.

The FTSE 100 defence company said the purchase of the Colorado-based business would help it to expand in technologies that were US defence priorities.

The deal comes amid a surge in spending on global military and spying technology prompted by Russia’s invasion of Ukraine. It also follows the US setting up a separate arm of the military, space command, to try to keep up with China. Both have prompted western allies to recommit to bigger military budgets, to the delight of weapons manufacturers that have received huge orders.

Ball Aerospace’s parent company, Ball Corporation, traces its roots back to making paint cans and glass jars in the 1880s in Buffalo, New York, and it now makes beer cans and aerosol bottles by the million.

The aerospace business, up for sale since June, specialises in instruments, sensors and spacecraft, including some of the most sensitive satellite technologies, as well as civilian applications such as monitoring weather patterns. Ball’s optics technologies were used on the Hubble space telescope and it built the Kepler telescope used to search for Earth-like planets.

However, its focus is selling high-margin military technology. Ball’s defence technologies include laser communication systems to link infantry and drones via satellite, and satellite tracking systems that allow spacecraft to monitor potential threats from other vehicles in space, as military competition increasingly spreads into Earth’s orbit.

Ball Aerospace has “strong growth potential in areas aligned with the US intelligence community and [US] Department of Defense’s highest priorities”, BAE told the stock market on Thursday.

BAE is by far the UK’s largest defence company, with a stock market valuation of more than £30bn. It makes and services a huge array of weapons ranging from tanks to fighter jets and the UK’s Vanguard submarines that carry Trident nuclear missiles. This month BAE also reported record orders since Russia’s invasion, and its stock market value has risen by almost three-quarters since the start of 2022.

BAE said more than 60% of Ball’s 5,200 employees hold US security clearances, allowing them to work on sensitive military technologies.

The number of big UK mergers and acquisitions has slowed in the past two years, after a frenzy as the world bounced back from coronavirus lockdowns.

However, there have still been a few large UK deals agreed in 2023, including Vodafone’s £15bn deal with Three to merge their UK telecoms operations, and the £4.5bn takeover of veterinary pharma company Dechra by Sweden’s EQT. Only one other deal involving a UK company – oil company BP’s £2.5bn takeover of petrol retailer TravelCenters of America – has been larger than £2bn this year, according to data from Dealogic.

Yet the defence industry boom has made mega-deals in that sector more attractive. In the US, L3Harris Technologies bought the rocket engine maker Aerojet Rocketdyne for $4.7bn in a deal that it completed last month.

The Ball Aerospace purchase will give BAE a business with $2bn in revenues and $310m in profits in space, missiles and military computing technologies, and BAE wants to grow the business by 10% a year over the next five years.

However, Chloe Lemarie, an analyst at Jefferies, an investment bank, described the deal as “slightly expensive”, and shares in BAE Systems fell by 4.5% on Thursday.

Charles Woodburn, BAE’s chief executive, said: “The proposed acquisition of Ball Aerospace is a unique opportunity to add a high quality, fast growing technology-focused business with significant capabilities to our core business that is performing strongly and well positioned for sustained growth. It’s rare that a business of this quality, scale and complementary capabilities, with strong growth prospects and a close fit to our strategy, becomes available.”

BAE said there would be $30m of cost savings in areas such as joint procurement and better management of projects but did not make reference to job cuts. The deal is expected to be completed early next year, if regulators give it the green light.