ITT Group beefs up defense assets
US-based ITT Group is the remnant on what was once a monster conglomerate selling everything from Wonder bread to telephone systems to (Sheraton) hotel rooms. Now the company specializes in three area of highly engineered products:
- defense electronics (including battlefield communications equipment, night goggles (it's the #1 maker), and drone aircraft
- hydraulic systems (pumps, valves, and heat exchangers)
- transportation (shock absorbers, friction pads, and similar devices)
The company recently announced it would buy US-based Edo Group, a defense electronics company that specializes in devices that jam roadside bombs (countermeasure systems) , as well as aircraft electronics, surveillance systems, and communications equipment. 80% of its income is based on contrast with the US military.
The deal is for about $1.6 billion, $1.9 billion with assumption of debt. According to a Bloomberg story ("ITT to Buy EDO for $1.58 Billion to Add Electronics", 0/17/07) "EDO has a funded backlog of about $500 million to provide jammers used by the U.S. military to help counter roadside bombs that are detonated using cell phones or other signals, ITT said during a conference call today. Jammers interrupt the device's remotely triggered detonator. The jammers are part of the Pentagon's CREW program, which most recently awarded $171.8 million worth of jamming work to EDO."
It is considered likely that defense rivals Lockheed Martin, L3 Communications, and General Dynamics may come in with higher bids. As so often happens, an announcement of a deal may be a prologue to a bidding war. The question is, with uncertainties based on the next US presidential election, whether the jamming technology, a big growth area for EDO, might decline due to withdrawals from Iraq.
ITT executives announced that they are pursuing other purchase in the defense area. Defense M&A activity has been slower over the past year than previously. It will be interesting to see what happens with it as the Bush administration nears the end of its term and a significant reduction of the Iraq war looms closer.
10:43:00 PM 
|
|
