Kratos, SYS see growth through merger

Kratos Defense and Security Solutions Inc. and SYS Technologies Inc., two companies focused on the defense and homeland security markets, have agreed to merge in an all-stock transaction, the companies announced today.

The companies said they view the merger as a way to broaden their defense, command and control, public safety and security businesses. Following the merger, SYS will operate as a unit of Kratos.

Kratos plans to exchange about 25 million shares of its common stock for 100 percent of SYS' shares. The merger is expected to close in the second calendar quarter.

Under the agreement, SYS stock will be converted into Kratos stock at an exchange rate of 1.2582 shares of Kratos common stock for each outstanding share of SYS common stock. On closing, SYS shareholders will own about 23 percent and existing Kratos shareholders about 77 percent of the combined company.

Eric DeMarco will continue as president and chief executive officer of Kratos, and SYS President and CEO Cliff Cooke will oversee Kratos' corporate development and strategic business development initiatives. Kratos expects to have annual revenue approaching $400 million by the end of 2008.

Kratos will have a substantial base of business with the Defense Department's Space and Naval Warfare Center in San Diego; Naval Sea Command in Oxnard, Calif.; the Defense Information Systems Agency; and other customers.

Both companies are based in San Diego. SYS provides information connectivity solutions that help clients capture, analyze and present real-time information. Kratos provides engineering, information technology services and warfighter solutions.