Finmeccanica buys DRS for $4B in defense deal

Rome-based Finmeccanica will pay $81 per share in cash, representing a 32 percent premium over DRS's 30 day average stock price, the statement said. Finmeccanica will also cover $1.2 billion in net debt.

Finmeccanica boosts its international role supplying defense and security systems, becoming a "key player," and DRS will get new leverage in securing large-scale projects globally.

The weak dollar opened the path for European companies to enter the U.S. market on numerous fronts.

Finmeccanica SpA joins Airbus parent EADS as a European company pushing into the lucrative U.S. defense and security market. EADS, in a partnership with Northrop Grumman, landed a massive contract to sell mid-air refueling tankers to the Air Force and purchased PlantCML, a California emergency call center company.

To satisfy U.S. regulations for foreign-owned defense companies, DRS will keep its own board of directors comprised mostly of Americans holding high security clearance and a special oversight board. It will maintain its current management and headquarters, located in Parsippany, N.J.

DRS makes a wide range of electronic gear for the U.S. military and intelligence agencies, including thermal imaging devices, combat display workstations, power systems, and air combat training systems.

"Today's transaction is a perfect fit," said Pier Francesco Guarguaglini, chairman and chief executive of Finmeccanica. "The merger furthers Finmeccanica's tradition of investing in the U.S. and supporting the American warfighter with superior technology and value."

Finmeccanica shares rose 1.2 percent to 21.62 euros ($33.36) in Milan.

Banca IMI analyst Monica Bosio said they price-per-share was higher than anticipated, but that eventual synergies may account for the difference. Banca IMI forecast a 20 percent to 22 percent premium.

"Thanks to this accord Finmeccanica assumes a greater global importance in a market where the margins are greater than domestically," Bosio said.

Finmeccanica builds helicopters, civil and military aircraft, satellites, missiles and defense electronics.

DRS is a leading supplier of integrated products, services and support to military forces, government agencies and prime contractors worldwide.

Finmeccanica, which is 34 percent owned by the Italian government, has 60,000 employees worldwide, 2,100 of those in North America. DRS employs 10,000.

"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.," said Mark S. Newman, chairman of the board, president and chief executive officer of DRS.

Also on Tuesday, Finmeccanica said it had bought about 11.1 percent of Eurotech SpA for 4.6 euros ($7.10) per share, amounting to around 18.1 million euros ($27.93 million).

Eurotech is a leading producer of miniaturized and high-performance computers.

Finmeccanica said in a statement that the entrance into Eurotech's share capital will help it create "significant growth in the U.S. and Japan."

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AP Business Writer Colleen Barry contributed to this report from Milan.