Italian firm acquires Pentagon supplier
Finmeccanica SpA, Italy's biggest defense company, agreed to buy US military electronics maker DRS Technologies Inc for $4 billion to win Pentagon contracts.
Finmeccanica offered $81 for each DRS share, according to a press release issued yesterday in Rome. The offer was 4.9 percent more than Monday's DRS closing price in New York of $77.19 and 27 percent more than the shares were trading before the Wall Street Journal reported the possible combination with Parsippany, New Jersey-based DRS on Thursday.
Finmeccanica and other European defense contractors have sought work and acquisitions in the United States, where military spending has grown faster than in their home markets. BAE Systems Plc, Europe's largest weapons maker, bought Jacksonville, Florida-based Armor Holdings Inc, the biggest maker of armor for Humvee transports, last year for more than $4.1 billion. Including $1.2 billion in net debt, Finmeccanica will pay $5.2 billion.
"DRS would give Finmeccanica a good footprint to build itself in the US defense market," wrote Colin Crook, an analyst for UBS AG.
DRS makes flight recorders, sensors and thermal-imaging devices that are used on US military helicopters and ships.
"This transaction would boost Finmeccanica's defense electronics capabilities and provide an avenue for them to migrate their technology into the US," wrote Rupinder Vig and Scott Babka, analysts for Morgan Stanley.
Finmeccanica, based in Rome, is controlled by the Italian government with a 32 percent stake. Finmeccanica makes carbon-fiber frames for Boeing Co's 300-seat 787 Dreamliner, and its AgustaWestland helicopter division has a supply contract with Lockheed Martin Corp for the US presidential fleet.
The Italian company said in November it has about 3 billion euros to spend on acquisitions and has an investment target of 4.2 billion euros through 2010.
Agencies
(China Daily 05/14/2008 page17)
