Textron reported this morning that it will pay $1.1 billion, or $81 per share, to acquire United Industrial . The price represents a premium of 7% to UIC's Friday close at $75.62. The move is expected to broaden [TXT's] leadership into unmanned vehicles, according to Textron chief Lewis Campbell. UIC produces aerospace and defense systems through its AAI Corp. unit and subsidiaries. Campbell stated that AAI is a superb strategic fit for Textron, whose offerings include Cessna jets.
S&P 500 Index member Textron saw its shares hold steady in pre-market action, while UIC jumped nearly 6% higher. TXT bounced higher in late September after consolidating into its 20-week moving average for about a month. Meanwhile, UIC has beat a steady path higher since May. The shares could get a continued boost from short-covering support currently, more than 17% of UIC's available float has been sold short, and it would take more than 9 trading days for these bearish bets to be fully repurchased at the stock's average daily volume.
The boards of directors for both TXT and UIC have already approved the deal, which is forecast to be completed by the end of this year. Textron was advised by Merrill Lynch and Rothschild, while UIC was counseled exclusively by J.P. Morgan Securities. News of the deal gave an early boost to AeroVironment (AVAV), another company in the unmanned-aircraft business.