ROME and PARSIPPANY, N.J., 31 May 2008.Finmeccanica, S.p.A. and DRS Technologies, Inc., announced earlier this month that they have signed a definitive merger agreement under which Finmeccanica will acquire 100 percent of DRS stock for U.S. $81 per share in cash.
The merger enables Finmeccanica, in Rome, Italy, 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, while allowing DRS, -- headquartered in Parsippany, N.J., -- to seek new business opportunities in the U.S. and abroad, DRS officials say.
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," says 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," says 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."
The transaction, valued at approximately U.S. $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.
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.
Finmeccanica and its subsidiaries in Pennsylvania, New York, Texas, California, New Jersey, Kansas, Virginia, North Carolina, 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.
Additional information on the merger
DRS intends to file with the U.S. Securities and Exchange Commission a proxy statement to stockholders of DRS and other relevant documents in connection with the proposed transaction. Investors and security holders of DRS are urged to read the proxy statement and other relevant materials if and when they become available because they will contain important information about Finmeccanica, DRS, and the proposed transaction. Investors and security holders may obtain a free copy of these materials (when they are available) and other documents filed with the U.S. Securities and Exchange Commission at the U.S. Securities and Exchange Commission's web site at http://www.sec.gov. A free copy of the proxy statement, when it becomes available, also may be obtained from DRS, [address], Attn: Investor Relations. Investors and security holders may access copies of the documents filed with the U.S. Securities and Exchange Commission by DRS on its web site at http://ir.DRS.com.
Participants in Solicitation
Finmeccanica, DRS, and their respective executive officers and directors may be deemed to be participants in the solicitation of proxies from their respective stockholders with respect to the proposed transaction. Information regarding DRS' directors and executive officers is available in its proxy statement filed with the U.S. Securities and Exchange Commission by DRS on July 3, 2007. Other information regarding the participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, will be contained the proxy statement and other relevant materials to be filed with the U.S. Securities and Exchange Commission when they become available.
This communication shall not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. This communication is not an offer for sale of any securities in the United States. Securities may not be offered or sold in the United States absent registration or an exemption from registration under the U.S. Securities Act of 1933, as amended, and the rules and regulations there under. Finmeccanica has not registered and does not intend to register any portion of any offering of securities in the United States or to conduct a public offering of any securities in the United States.