PROVIDENCE, R.I. (AP) – Textron Inc. is buying United Industrial Corp. in a $1.1 billion deal that underscores its expectations for U.S. military reliance on unmanned aircraft.
The deal announced Monday would help Textron expand its aerospace and defense business.
United Industrial’s AAI Corp. unit, based in Hunt Valley, Md., makes aerospace and defense systems including unmanned aircraft and ground control stations and counter-sniper devices.
Textron, a diversified conglomerate, owns Bell Helicopter and Cessna, and also makes golf carts, auto parts and surveillance systems.
In a conference call Monday, Textron chief financial officer Ted French said the company believed that the military would continue to rely on unmanned aircraft and vehicles, as it does currently in Iraq and Afghanistan.
“The role of unmanned systems is expected to continue to expand, providing us with significant growth opportunities,” French said. “And we believe we can convert this growth into expanding shareholder value.”
Defense contractors Northrop Grumman Corp. and privately held General Atomics are more widely known when it comes to unmanned aircraft used by the military for reconnaissance missions, says Loren Thompson, a defense analyst at the Virginia-based Lexington Institute.
However, the Pentagon ends up buying fewer of these top-of-the-line aircraft because of their higher price tags, opting instead for so-called UAVs made by United Industrial that are less expensive but have many of the same capabilities, Thompson said.
Under the deal, Textron said it will launch a cash tender offer of $81 a share for United Industrial stock as early as next week. The offer represents a 7.1 percent premium to United Industrial’s Friday closing price of $75.62.
Based on United Industrial’s 9.96 million shares outstanding at Aug. 2, the deal is valued at about $806.5 million. Including United Industrial stock expected to be issued to bondholders under terms of $120 million of 3.75 percent convertible senior notes issued in September 2004, the acquisition is valued at about $1.1 billion.
United Industrial shares rose $4.78, or 6.3 percent, to $80.40 in afternoon trading Monday after trading as high as $80.70. Textron shares fell $1.37, or 2.1 percent, to $64.01.
The boards of both companies have approved terms of the transaction.
In addition, two United Industrial directors, Warren G. Lichtenstein and Glenn M. Kassan, and Steel Partners II LP, an investment partnership controlled by Lichtenstein, which collectively own 2.01 million outstanding shares, have agreed to tender their shares in favor of the deal.
The company expects to complete the acquisition by the end of the year, subject to customary conditions and approvals.
Lewis B. Campbell, Textron’s chairman, president and chief executive, called AAI a “superb strategic fit for Textron.”
“It is in perfect alignment with our strategy to add important capabilities to our existing aircraft and defense businesses, adding new products and capabilities to further serve our government, military and homeland security customers,” Campbell said in a statement.
French said Textron has strict criteria for acquisitions. He said Textron looks for well-run companies that are market leaders and that operate in attractive industries with good growth prospects, among other factors.
“AAI meets every one of these” criteria, French said.
In addition to unmanned aircraft, AAI also provides aircraft and satellite test equipment and training systems, and has a services and logistics business to support its customers.
AAI will become part of Textron’s Bell segment, with most of the business operating within Textron Systems Corp., which makes precision weapons, surveillance systems, intelligence and communications systems, aircraft control systems, specialty marine craft and armored vehicles for the defense, homeland security and aerospace markets.
Projected revenue for AAI for this year is about $700 million. It has 2,500 employees worldwide.
Textron reported profit of $601 million on sales of $11.49 billion in fiscal 2006.
—-
AP Business Writer Donna Borak in Washington contributed to this report.
AP-ES-10-08-07 1602EDT
Send questions/comments to the editors.
