Finmeccanica to buy DRS Technologies

Italy's Finmeccanica SpA reached a $5.2 billion deal to buy DRS Technologies Inc., securing itself a bigger presence in the growing U.S. defence market which accounts for half the world's military spending.

Finmeccanica, Europe's fourth largest aerospace and defence group, said it would pay $81 cash per share to acquire the whole Parsippany, New Jersey company. The bid also includes around 1.2 billion in net debt.

The cash price offers a premium of 32 percent over DRS's thirty days average stock price, the companies said in a joint statement, adding that the group plans to delist DRS.

DRS will operate as a wholly-owned subsidiary, maintaining its current management and headquarters with a board comprised predominantly of U.S. citizens holding security clearances that will allow it to comply with security requirements, the statement said.

"Today's transaction is a perfect fit," said Pier Francesco Guarguaglini, chairman and chief executive officer of Finmeccanica. "The merger furthers Finmeccanica's tradition of investing in the U.S. and supporting the American warfighter with superior technology and value."

DRS supplies products such as radar and surveillance to military forces and intelligence agencies. The deal has been approved by the two board of directors but still requires approval by regulatory bodies.

The deal is expected to boost Finmeccanica's defence electronic capabilities and give it key local presence in the United States. But analysts have warned the company would be buying U.S. assets right before a likely peak in the defence budgets and in a U.S. election year.

With defence spending in Italy in decline for several years, growth overseas has become a necessity. Finmeccanica has sealed a wide range of foreign contracts, and its AgustaWestland unit is the world's second-biggest helicopter maker.

"The transaction will help the new company to bid and win larger scale projects in the U.S. and abroad," said the statement.

Source: Reuters

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