Leonardo DRS and Israel-based RADA Electronic Industries (Nasdaq: RADA) have agreed to merge in an all-stock transaction to form a public company focused on providing advanced sensing and force protection systems in the defense market.
The boards of directors of both companies approved the deal that is expected to conclude in the fourth quarter of 2022, subject to RADA shareholders’ approval, regulatory clearances and other customary closing conditions, the companies said in a joint release published Monday.
Upon the transaction’s closing, Leonardo DRS will operate RADA as a wholly owned subsidiary within its advanced sensing and computing segment and trade on Nasdaq under the ticker symbol “DRS.”
Leonardo DRS CEO William Lynn said the combination of RADA’s tactical radar platforms with Leonardo’s performance as a mid-tier defense tech provider will enable the combined entity to expand its presence in the force protection market, generate value for shareholders and broaden international opportunities.
“The transaction also provides flexibility for the Combined Company to add capabilities in Leonardo DRS’ core markets through targeted acquisitions and strategic investments as we expect to supplement strong organic growth with M&A and dividend distributions as part of our overall strategy going forward,” added Lynn.
The combined entity will also work on electrical power and propulsion, network computing and other defense products and will have presence in several force protection programs, including the ground-based air defense program with the U.S. Marine Corps and the Maneuver-Short Range Air Defense initiative.
The combined company had $2.7 billion in 2021 revenue and an earnings before interest, taxes, depreciation and amortization of $305 million with about $197 million in pro forma net financial debt at the end of the first quarter of 2022.
Leonardo shareholders will own about 80.5 percent and RADA shareholders will own 19.5 percent of the combined entity upon the completion of the transaction, which is expected to be tax-free and accretive to RADA’s earnings per share during the first year.
Evercore serves as exclusive financial adviser to RADA, while DLA Piper LLP (US) and S. Friedman & Co. act as legal advisers to the company.
J.P. Morgan Securities serves as exclusive financial adviser to Leonardo DRS. Sullivan & Cromwell and Herzog Fox & Neeman advise Leonardo on the deal’s legal aspect.