IDT to acquire division of BAE Systems

Integrated Defense Technologies Inc. of Huntsville, Ala., announced Sept. 13 that it will buy BAE Systems Advanced Systems operation in Gaithersburg, Md. IDT will pay the Farnborough, U.K., company $146 million in cash. The deal will close by the end of 2002. The purchase will be financed with cash on hand and debt. It is contingent upon Hart-Scott-Rodino and other government approvals.

The BAE Systems' Gaithersburg operation, which employs more than 300 people, designs and manufactures high-performance radio frequency surveillance equipment used in signals intelligence applications. The business supplies U.S. and allied government agencies with high-quality surveillance and intercept equipment, and 65 percent to 70 percent of its sales are sole-source transactions.

In a statement, IDT said the division is well-positioned to benefit from projected increases in intelligence spending and information technology intended to transform the U.S. military's intelligence and homeland security efforts.

"BAE Systems' Gaithersburg operation is consistent with the other acquisitions we have made in building Integrated Defense Technologies. The company is a leader in its markets, has above-average growth prospects, high margins, proprietary technology, and diversifies our customer base by opening up domestic and friendly foreign nations' intelligence agencies to our products," said Robert McKeon, chairman of IDT.

The Gaithersburg operation will be integrated into IDT's Communications and Surveillance Systems division, which currently represents about 22 percent of the company's revenue, growing to more than 35 percent of revenue after the purchase is completed. IDT's Communications and Surveillance Systems group produces systems for RF transmitters, including for the U.S. submarine fleet, microwave systems for the Predator and Global unmanned aerial vehicles, and signals intelligence for U.S. and foreign government intelligence collection.

"In its first 12 months of operation within our Communications and Surveillance Systems group, Gaithersburg is expected to add approximately $81 million to our annual revenue and generate $17 million in [earnings before interest, taxes, depreciation and amortization]," McKeon said. "We believe the transaction will allow us to further capitalize on industry trends focusing on increased intelligence and surveillance capabilities."