DRS Technologies [DRS] yesterday said it is in discussions regarding a “potential strategic transaction” for the company following a report in the Wall Street Journal that Italian aerospace and defense firm Finmeccanica was pursuing an acquisition of the United States-based defense contractor.
DRS declined comment beyond adding that “There is no assurance that any agreement will be reached.”
The fact that a European defense firm may be looking to acquire a U.S. defense company isn’t surprising given that the United States is seen as the most significant growth market for defense. However, only Britain’s BAE Systems has shown a steady appetite for acquisitions of U.S. defense firms beginning in the late 1990s.
If Finmeccanica is successful closing its pursuit of DRS, a deal would significantly expand its operational and customer footprint in the United States. Finmeccanica is a key teammate and supplier to Lockheed Martin [LMT] on the U.S. Presidential helicopter program, VH-71, and to L-3 Communications [LLL] on the Army and Air Force C-27J Joint Cargo Aircraft Program. Finmeccanica also operates an assembly facility in Philadelphia, Pa., for its AW139 twin-engine helicopter.
DRS is projecting $3.2 billion in sales this year and has 10,000 employees. Almost four years ago, the company rebuffed an attempt by L-3 to acquire it for $42 per share. According to the Wall Street Journal, its sources said that Finmeccanica was offering close to $80 per share for DRS, which is at least a 25 percent premium to its stock price of $63.74 on Wednesday at the close of trading. DRS’ stock closed up yesterday $10.15, or nearly 16 percent, to $73.89.
DRS’ announcement that it is in talks about a potential sale is viewed by some that the company will entertain higher offers.