Published: May 15, 2008 09:26 am         

Italian company offers $5.2B for DRS

Company officials say deal not expected to result in loss of local facility, rather plans are to expand

By Lacie Morrison
lmorrison@mineralwellsindex.com

An Italian company called Finmecccanica SpA is poised to acquire DRS Technologies, a New Jersey-based company with ties in Mineral Wells, in a deal totaling more than $5 billion.

With unanimous approval from both companies, the definitive merger agreement allows “DRS to seek new business opportunities in the U.S. and abroad. … The transaction allows Finmeccanica to consolidate its international role as a key supplier of integrated systems for defense and security, entering the U.S. market as a key player,” according to a press release issued by DRS.

“They approached us and we decided it could be a very compelling proposition for our shareholders,” said Mark S. Newman, chairman, president and chief executive of DRS.

The cost of the acquisition is $4 billion in addition to covering $1.2 billion in net debt. Under the agreement, Finmeccanica will acquire 100 percent of DRS stock for $81 per share in cash.

If approved and finalized, DRS would be the third business in Mineral Wells involved in a corporate acquisition since October, following the sales of Perry Equipment to a Tennessee company and S-TEC Corporation to a British interest.

According to DRS' Vice President of Investor Relations Pat Williamson, the proposed acquisition would not impact the Mineral Wells facility.

“We don't anticipate that it would,” she told the Index. She estimated that DRS' Mineral Wells facility employed “well under 50 employees.”

“It's not like other acquisitions … where there's a lot of cost cutting. It's different because the idea behind it is for Finmeccanica to have more of a U.S. presence. We're expecting to grow, not lay off or consolidate,” she explained.

If there is any consolidation of employees, Williamson said the Italian company's 2,100 employees in the United States would be absorbed into DRS' defensive electronics.

Finmeccanica's chairman and chief executive officer Pier Francesco Guarguaglini described the transaction as “a perfect fit; the complementary technologies and platforms will establish a new competitive player in defense and security markets in the U.S. and around the world. The merger furthers Finmeccanica's tradition of investing in the U.S. and supporting the American warfighter with superior technology and value.”

Finmeccanica constructs both civil and military aircraft, helicopters, missiles, satellites and defense electronics. DRS is a “leading supplier of integrated products, services and support to military forces, government agencies and prime contractors worldwide,” according to their press release.

While DRS will operate as a “wholly owned subsidiary, maintaining its current management and headquarters,” the companies stated they will comply with all national security requirements and propose that the company operate under a special security agreement with its own board of directors, comprised predominantly of U.S. citizens with security clearances and a government security committee.

According to DRS, “with increased business opportunities that will arise following the transaction, it is expected that DRS will expand its overall employment base.”

DRS employs 10,000 people while Finmeccanica employs 60,000 people worldwide.

“DRS' dramatic growth over the past five years and the premium provided through this acquisition will provide attractive returns for our stockholders,” said Newman. “This investment in DRS - with an increased emphasis on research and development - will mean the combined company will be able to compete for and win additional contracts around the world, accelerating growth and expanding opportunities at our facilities in the U.S.”

According to DRS, the transaction is subject to a number of factors, including approval by the stockholders of DRS, the receipt of regulatory approvals and other closing conditions, including review by the U.S. Antitrust Authorities, the Committee on Foreign Investment in the United States and the Defense Security Service. The companies expect to close the transaction by the fourth quarter of 2008.

Information from the Associated Press was used in this article.



Related Web sites:

www.drs.com/index.aspx

www.finmeccanica.com