By AP/KWMU
PARSIPPANY, N.J. – Defense contractor DRS Technologies Inc. said Thursday it will buy Engineered Support Systems, a St. Louis-based military equipment maker, for about $2 billion.
"This is another exciting chapter for ESSI, taking our company to the next level and delivering excellent value to our stockholders, " said Gerald A. Potthoff, Engineered's CEO, in a statement. "DRS Technologies is a highly-regarded presence in defense technology, and with ESSI will become a sizable, diversified industry competitor, strategically positioned for exciting growth opportunities."
DRS will pay $43 per share in cash and stock, representing a 29% premium to the stock's Wednesday closing price. Engineered Support's debt will also be refinanced in the deal. The total purchase price, including debt, comes to about $1.97 billion.
The transaction is expected to close before the end of DRS's fiscal 2006, and is subject to regulatory and shareholder approvals.
Engineered Support will become DRS's third operating group, focused on support and services.
"The combination of the two companies will firmly establish DRS Technologies as a leading provider of defense electronics products and services with a run rate in excess of $2.5 billion in annual revenue and a major role in armed forces modernization, personnel mobility and O&M support," said DRS' chairman, president and CEO Mark S. Newman.
DRS also noted that the deal will diversify the company's program base so that no single product or program accounts for more than 3% of annual revenue; the 10 largest programs account for about 20%.
Engineered has more than 3,200 employees. The company makes military support equipment, including systems for environmental control, power generation and distribution, airborne radar, and reconnaissance. Non-military products include material-handling equipment for the U.S. Postal Service and commercial and industrial heat transfer and air-handling units.
DRS maker of surveillance and radar systems, rugged computers and flight recorders. It relies on U.S. government agencies for about 85% of sales.