Tuesday, May 13, 2008

Finmeccanica to Acquire DRS for US$5.2 billion (Euro 3.4 billion). Creates a New Leading Player in Defense Electronics with Balanced Global Presence

Finmeccanica to Acquire DRS for US$5.2 billion (Euro 3.4 billion). Creates a New Leading Player in Defense Electronics with Balanced Global Presence Rome (Italy) and Parsippany (NJ USA), 13 May 2008

Finmeccanica, S.p.A. (Milan: FNC), a world leader in the supply of electronics equipment and defense and security systems and services, and DRS Technologies, Inc. (NYSE: DRS), a leading supplier of integrated defense electronics products, services and support, today announced that they have signed a definitive merger agreement under which Finmeccanica will acquire 100% of DRS stock for US$81 per share in cash.

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. It further allows DRS to seek new business opportunities in the U.S. and abroad.

The transaction, valued at approximately US$5.2 billion (Euro 3.4 billion), inclusive of approximately $1.2 billion in net debt, following the conversion of DRS' convertible notes, 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 NYSE.

The Boards of Directors of Finmeccanica and DRS have each approved the terms of the agreement.

DRS will operate as a wholly-owned subsidiary, maintaining its current management and headquarters. As is customary in this type of transaction, DRS and Finmeccanica will comply with all national security requirements and will propose to the Defense Security Service (DSS) that the company operate under a Special Security Agreement (SSA), with its own board of directors comprised predominantly of U.S. citizens holding security clearances and a government security committee. With increased business opportunities that will arise following the transaction, it is expected that DRS will expand its overall employment base.

"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.".

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 largerscale 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.

Finmeccanica and its subsidiaries in Pennsylvania, New York, Texas, California, New Jersey, Kansas, Virginia, North and South Carolina have a rich history in the U.S., including its work for the U.S. government on programs such as the VH-71 presidential helicopter and the C-27J joint cargo aircraft. DRS will lead Finmeccanica's defense electronics efforts in the U.S. after the transaction closes.

Financing for the acquisition will be structured so as to preserve a solid capital structure, guarantee adequate financial flexibility to further support growth and deliver value creation to Finmeccanica's shareholders.

Finmeccanica will fund the acquisition with a Syndicated Loan Facility to be taken out by a combination of equity issuance, long-term debt issuance, and divestitures of its assets. Among these will be an IPO of AnsaldoEnergia. Terms and conditions will be determined upon completion of the transaction.

The transaction is subject to approval by the stockholders of DRS, the receipt of regulatory approvals and other closing conditions, including review by U.S. Antitrust Authorities, the Committee on Foreign Investment in the United States (CFIUS) and the Defense Security Service (DSS). The transaction is expected to close by the fourth quarter of 2008.

Goldman Sachs International, IntesaSanPaolo S.p.A., Mediobanca-Banca di Credito Finanziario S.p.A. and Unicredit Group are serving as Bookrunners and Mandated Lead Arrangers of the Syndicated Loan Facility. Sullivan & Cromwell LLP is acting as legal advisor to Finmeccanica in connection with the Syndicated Loan Facility. Linklaters and Legance are acting as legal advisors to the banks.

Lehman Brothers Holdings Inc. is serving as financial advisor to Finmeccanica, with Goldman Sachs International and Mediobanca providing a fairness opinion. Arnold & Porter LLP is serving as legal advisor to Finmeccanica. Bear Stearns & Co. Inc. and Merrill Lynch & Co. are serving as financial advisors to DRS and rendered fairness opinions to the DRS board of directors.

DRS' legal advisors are Skadden, Arps, Slate, Meagher & Flom LLP.

No comments: