ITT Corporation of White Plains, NY and has reached a definitive agreement for ITT to purchase all outstanding shares of NYC-based EDO Corp. for $56 per share in cash. Including approximately $120 million of net debt and the anticipated conversion of convertible notes, this transaction values EDO at $1.7 billion. The transaction is subject to approval by EDO’s shareholders, as well as customary closing and regulatory conditions; it is expected to close in early 2008. Lazard LLC and UBS Investment Bank are acting as financial advisors to ITT, and Simpson Thacher & Bartlett LLP is legal counsel. EDO’s financial advisor is Citigroup, and their legal counsel is Debevoise & Plimpton LLP.
Both companies are mid-market defense firms, and have been mentioned in takeover rumors; their merger continues existing trends in information technology, communication, and high-tech field equipment. ITT is a global leader in water and fluid transport, treatment, and control technology, who also has direct defense applications via communications and electronics, space surveillance systems, intelligence systems; and advanced engineering. EDO has about 4,000 employees; its strengths include mobile networking and integration, interference cancellation and antennas, advanced engineering, and interference creation via electronic jammers.
For the six-month period ended June 30, 2007, EDO’s revenue was up 83% to $501.4 million vs. the first half of 2006, and EDO’s revised Q2 guidance [PDF] forecast 2007 total revenue of $1.1 – $1.15 billion. ITT generated $7.8 billion in 2006 sales, and expects the acquisition to be neutral to its earnings per share in 2008, and accretive thereafter. The firm adds that the acquisition will give them roles in key initiatives such as the F-35 Joint Strike Fighter, the Navy’s Littoral Combat Ship, counter improvised explosive device (IED) programs, and the Coast Guard Deepwater programs. Other than the JCREW anti-IED contracts, however, all of the programs mentioned present some level of procurement risk due to cost and schedule issues. ITT release.