Italian defense firm to buy DRS

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ROME (AP) — Italian aerospace and defense company Finmeccanica will buy U.S. military contractor DRS Technologies Inc. for $4 billion, giving it a prominent position in the American defense market.

Rome-based Finmeccanica yesterday said it will pay $81 per share in cash, representing a 32 percent premium over DRS's 30-day average stock price. Finmeccanica also will assume $1.2 billion in debt.

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

Both boards unanimously approved the deal, which is expected to close in the fourth quarter, he added.

The deal boosts Finmeccanica's international role supplying defense and security systems, while DRS gets new leverage in securing large-scale projects globally.

The weak dollar opened the path for European companies to enter the U.S. market on numerous fronts.

Finmeccanica SpA joins Airbus parent EADS as a European company pushing into the lucrative U.S. defense and security market. EADS, in a partnership with Northrop Grumman, landed a massive contract to sell mid-air refueling tankers to the Air Force and purchased PlantCML, a California emergency call-center company.

To satisfy U.S. regulations for foreign-owned defense companies, DRS, which will retain its name, will keep its own board of directors, made up mostly of American citizens holding high security clearances, and a special oversight board. It will maintain its current management and headquarters in Parsippany, N.J., along with offices in Arlington, Va.

DRS makes a wide range of electronic gear for the U.S. military and intelligence agencies, including thermal imaging devices, combat-display workstations, power systems, and air combat training systems.

"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 war fighter with superior technology and value."

Finmeccanica builds helicopters, civil and military aircraft, satellites, missiles and defense electronics.

DRS is a leading supplier of integrated products, services and support to military forces, government agencies and prime contractors worldwide.

Finmeccanica, which is 34 percent owned by the Italian government, has 60,000 employees worldwide, 2,100 of them in North America. DRS employs 10,000.

"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.," said Mr. Newman.

Shares of DRS rose 48 cents to $77.67 in New York. Finmeccanica shares rose 4.5 percent to $31.56 in Milan trading.