Leonardo DRS buys Israeli radar company RADA with a 34% premium

Netanya-based Israeli defense company RADA Electronic Industries Ltd. (TASE: RADA; Nasdaq: RADA), which manufactures tactical radar systems, is merging with the American company Leonardo DRS Inc. The share-based deal will result in RADA’s existing shareholders owning 19.5% of the merged company. The deal is expected to close in the fourth quarter of this year. RADA will become a wholly owned subsidiary of Leonardo DRS, which will be listed on the Nasdaq and the Tel Aviv Stock Exchange under the symbol DRS. The terms of the deal represent a 34% premium over RADA’s share price at yesterday’s close, valuing the company at $ 775 million.

The combined company is expected to generate EBITDA as a percentage of low double-digit revenue in 2023. The combined company had $ 2.7 billion in revenue and $ 305 million in adjusted EBITDA in 2021. At the end of the first quarter of 2022, the combined company had debt of approximately $ 197 million.

RADA is a veteran company that has been involved in avionics for most of its existence. More than a decade ago, it entered a new field, that of advanced software-defined military tactical radars. The radars are mounted on military vehicles and operate on the move. In this way, they provide the ground forces with active protection, such as against mortars and attacking drones. The company is still active in its traditional field of avionics.

“RADA and Leonardo DRS are strong and complementary technology companies and their close historical relationships through collaboration on a number of programs have led to a deep cultural fit,” the companies said in a statement.

The communication also states that “Leonardo DRS ‘parent company and sole shareholder, Leonardo SpA, is a leading global company in the aerospace and defense industry. Leonardo SpA’s market position will provide access to a changing European defense market, as well as to defense markets around the world, while creating an internal market in Israel. “

RADA CEO Dov Sela said: “I could not be more proud of the platform we have built in my almost 20 years with RADA, culminating in this important strategic deal with Leonardo DRS. The combination of two leading technology-focused defense companies with diversified exposure to key programs of the US Department of Defense and an international presence creates a real profit for the shareholders of RADA and Leonardo DRS.

“The transaction is the first time a large US-based defense company, backed by a global defense leader, has acquired a major Israeli defense technology company. This unique deal will strengthen the Israeli defense industry and set trends and direction for the future.

“The conflict in Ukraine has highlighted the vulnerability of forces to drone attacks and stressed the need for modern, capable force protection systems. This not only accelerates the purchase of these systems from the United States, but also moves European countries that are lagging far behind. This area to acquire more critical assets to protect the forces. The combination of RADA and Leonardo DRS will open up international market opportunities, especially in the field of short-range air defense, UAS counter-missiles, anti-missiles, artillery and mortars, and vehicle protection systems, “said William J. Lynn III, chief Executive Director of Leonardo DRS.

Evercore serves as the exclusive financial advisor to RADA, and JP Morgan Securities LLC serves as the exclusive financial advisor to Leonardo DRS. DLA Piper LLP (USA) and S. Friedman & Co. serve as legal advisors to RADA and Sullivan & Cromwell LLP, and Herzog Fox & Neeman serve as legal advisors to Leonardo DRS.

Posted by Globes, Israel Business News – en.globes.co.il – on June 21, 2022.

© Copyright by Globes Publisher Itonut (1983) Ltd., 2022.

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