In an effort to extend its footprints in cyber and intelligence markets, Boeing Company (BA) has decided to acquire Argon ST Inc. (STST). This will be an all-cash transaction and will cost $775 million or $34.50 per share. The acquisition plan follows the successful partnership with Argon ST for more than two years.
Based in Fairfax, Virginia, Argon ST is a premier developer of command, control, communications, computers, intelligence, surveillance and reconnaissance (C4ISR) and combat systems. This acquisition will allow Boeing to better address the C4ISR, cyber and intelligence markets.
The decision to acquire Argon ST will enable Boeing to meet the changing requirements of the U.S. Defense Department. The Pentagon is presently investing in high-tech intelligence equipment rather than the conventional big guns and heavy armor to fight terrorist groups from the Middle East and elsewhere.
The acquisition will likely be completed by the end of third quarter 2010, subject to the tendering of a majority of outstanding shares of Argon ST and regulatory approval. Once the acquisition of Argon ST is completed, it will continue to perform as a standalone subsidiary of Boeing with the same chairman and management team.
Argon ST will become a new division of Boeing Network & Space Systems, a business within Boeing’s operating unit Boeing Defense, Space & Security. Boeing Defense, Space & Security is one of the world’s largest defense, space and security businesses, specializing in innovative and capabilities-driven customer solutions, and also a manufacturer of military aircraft.
Although the acquisition is unlikely to have any financial impact on Boeing’s profitability, we applause the decision to acquire Argon ST. We believe the acquisition will enable the company to use the technical expertise of Argon team but also have a new domestic and international customer base.
We believe this will broaden Boeing’s product base and enable it to meet the changing needs of the defense establishment, as more than 50% of the company’s revenues come from defense contracts. The major competitors of the company are General Dynamics Corp. (GD), Lockheed Martin Corporation (LMT) and Northrop Grumman Corporation (NOC). We retain a Neutral rating and have a Zacks #3 Rank (Hold).
Read the full analyst report on “BA”
Read the full analyst report on “GD”
Read the full analyst report on “LMT”
Read the full analyst report on “NOC”
Zacks Investment Research
