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Acquisition of DRS Paves Finmeccanica's Road to US

Another mega deal reshapes the global map of defense industries – the Italian aerospace and defense group Finmeccanica SpA is ready to offer US$5.2 billion 3.4 billion Euros) for US based DRS. Last week DRS released an announcement it is engaged in discussions contemplating a potential strategic transaction involving the company. DRS and Finmeccanica announced May 13, 2008 that they have signed a definitive merger agreement under which Finmeccanica will acquire 100% of DRS stock for US$81 per share in cash. This transaction represents a premium of 27 percent to DRS' closing share price on May 7, 2008; it is also a 32 percent premium over DRS' thirty-day average stock price traded on the NY Stock Exchange.

"Today's transaction is 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," 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' dramatic growth over the past five years and the premium provided through this acquisition will provide attractive returns for our stockholders,"

said Mark S. Newman, chairman of the board, president and chief executive officer of DRS. "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 Garrick Ngai, defense industry analyst with the Frost & Sullivan Aerospace & Defense Group. Ngai considers Finmeccanica's Move to be a major opportunity for continued growth for the Italian conglomerate. "Finmeccanica's acquisition of DRS Technologies will enable the Italian conglomerate to leverage its core competencies in defense electronics and systems with an American leader in the field," notes Ngai. He considers that following with this acquisition Finmeccanica will be able to introduce its diverse defense portfolio into the U.S., which is by far the largest defense market in the world.

DRS will new markets for the Italian company, within the military, Department of defence and federal agencies. "This is a very smart move by Finmeccanica, as it cannot rely on either the Italian or European defense markets for continued growth." concludes Ngai.

He considers that following with this acquisition Finmeccanica will be able to introduce its diverse defense portfolio into the U.S., which is by far the largest defense market in the world. DRS will new markets for the Italian company, within the military, Department of defence and federal agencies. "This is a very smart move by Finmeccanica, as it cannot rely on either the Italian or European defense markets for continued growth." concludes Ngai.

For DRS, the combination with Finmeccanica will enable an American company and brand to better compete in the global military and security market. The transaction will help the new company to bid and win larger-scale projects in the U.S. and abroad.


For Finmeccanica, the transaction will boost its existing position as a top-tier competitor, enabling it to enhance the product and service solutions it provides to its customers. Finmeccanica's platforms and areas of expertise (helicopters; defense electronics and security; aeronautics; space; defense systems; energy; and transportation) wholly complement DRS' growing market penetration by its four primary business segments: Command, Control, Communications, Computers & Intelligence (C4I); Reconnaissance, Surveillance & Target Acquisition (RSTA); Sustainment Systems; and Technical Services.

According to the agreement between the companies, DRS will operate as a wholly-owned subsidiary, maintaining its current management and headquarters. DRS will lead Finmeccanica's defense electronics efforts in the U.S. after the transaction closes. Finmeccanica already operates subsidiaries in Pennsylvania, New York, Texas, California, New Jersey, Kansas, Virginia, North and South Carolina.

 

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