Ross Wilkers


Leonardo DRS sets its IPO size & specs

Arlington, Virginia-headquartered defense electronics company Leonardo DRS has set the terms for its pending initial public offering, according to amended regulatory documents and a company statement filed Friday.

DRS’ Italian parent company Leonardo will offer public investors a 22 percent stake in the subsidiary, which could increase to 25.3 percent of the IPO’s underwriters exercise their option in full to purchase additional shares if investor demand outstrips the initial supply.

Approximately 31.9 million shares will be available at a price range of between $20.00 and $22.00 each, which would then raise equity of $638 million-to-$701.8 million. The midpoint of the share price range implies a nearly $3 billion market value Leonardo DRS would command.

Leonardo DRS, which fully unveiled its plans for an IPO in late February, also intends to give its underwriters a 30-day option to purchase an additional 4.785 million shares that then would be available on the market.

If all those shares got purchased, that would fetch $105.3 million in additional equity and raise the total amount raised to $807.1 million.

The listing is anticipated to complete by the end of March, when Leonardo DRS’ stock would begin trading on the New York Stock Exchange under the ticker symbol “DRS.”

This essentially means Leonardo DRS takes the spot that stands to be vacated by fellow defense technology firm Cubic Corp. when it comes to publicly-traded contractors. Cubic is selling itself to private equity firm Veritas Capital and the PE arm of activist hedge fund Elliott Management.

Leonardo the parent company will take in all proceeds from the offering and use them to pay down debt, while Leonardo DRS says it will keep future profits for growth and does not have near-term plans to pay a dividend on its stock.

CACI International is another example of a publicly-traded government contractor that does not pay dividends, rather using its earnings to invest for growth and the occasional stock repurchase.

Leonardo acquired then-publicly traded DRS in 2008 through a deal valued at $5.2 billion including debt and is retaining its effective control of the subsidiary to maintain a presence in a U.S. defense market that for the most part avoided the coronavirus pandemic’s worst economic impacts.

The subsidiary plans to enter a new proxy agreement with the Defense Department to continue the work on and pursuit of classified business.

Leonardo DRS posted approximately $2.8 billion in revenue last year with $268 million in adjusted EBITDA (earnings before interest, taxes, depreciation and amortization), which translates to a 9.6 percent adjusted EBITDA margin.

Those numbers show year-on-year growth of 2.4 percent on the top line and 14.5 percent on the bottom line, plus an increase of 1 percentage point on the margin front.

Goldman Sachs, Bank of America Securities and J.P. Morgan are lead book-running managers. Barclays, Citigroup, Credit Suisse and Morgan Stanley are book-running managers. IMI-Intesa Sanpaolo, MUFG and UniCredit Capital Markets are co book-running managers. Mediobanca is acting as financial adviser to Leonardo.

About the Author

Ross Wilkers is a senior staff writer for Washington Technology. He can be reached at Follow him on Twitter: @rosswilkers. Also connect with him on LinkedIn.

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