Boeing to Buy Argon ST For $775 Million to Expand Military Electronics
Boeing Co. agreed to buy defense contractor Argon ST Inc. in a deal valued at about $775 million, expanding the planemaker’s reach into the market for military electronics.
The offer is for $34.50 a share in cash, or 41 percent more than Argon ST’s closing price yesterday of $24.43 a share, according to statements today from the Fairfax, Virginia-based company and from Boeing. The companies said the transaction value was “net of cash acquired.”
Boeing’s “willingness to spend $775 million could indicate confidence” that the company’s business is improving, Sam Pearlstein, an analyst at Wells Fargo Securities in New York, said in a note.
Argon ST supplies the U.S. military with equipment to locate and analyze electronic communication signals. The company expressed interest in “strategic alternatives” in January, saying it was considering mergers, acquisitions or a sale of itself.
Boeing is paying about 1.9 times Argon ST’s projected 2011 sales, Peter Arment, an analyst at Gleacher & Co. in Greenwich, Connecticut, said in an e-mail. Argon ST has “good positions” in the military market for command and control, cyber security and intelligence analysis, said Arment, who like Pearlstein recommends buying Boeing shares.
The sale should close by the end of the third quarter, Boeing said.
Boeing fell 29 cents to $62.75 at 4 p.m. in New York Stock Exchange composite trading, while Argon ST rose $9.86, or 40 percent, to $34.29 on the Nasdaq Stock Market.
1,000 Employees
Argon ST has about 1,000 employees, said David Sidman, a spokesman for Chicago-based Boeing. Argon ST Chief Executive Officer Terry Collins will continue to lead Argon ST as a stand- alone unit within Boeing, according to the companies.
“Combining the strength of Boeing with the experience of Argon ST will significantly accelerate our capabilities in sensors, communications technologies and information management,” Dennis Muilenburg, chief executive officer of Boeing Defense, Space & Security, said in the statement.
Boeing’s military business includes making aircraft as well as electronics and missile defense systems, generating sales of $33.7 billion in 2009. Counting civilian and military aircraft, the company is the world’s largest planemaker and had revenue totaling $68.3 billion last year.
With 21.9 million shares outstanding as of April 30, Argon ST had a market value of $535 million based on yesterday’s closing price, according to data compiled by Bloomberg. Net income for the year ended in September was $23.7 million on sales of $366 million.
To contact the reporter on this story: Gopal Ratnam in Washington at gratnam1@bloomberg.net.
Rate this Page