EDO buys important sigint company and large full-service provider

Published 27 July 2006

A leading defense contractor wisely acquires a leading signals intelligence company in order to become a player in the growing sigint market; it also acquires a premier full-service company

We wrote a few days ago of the growing importance of signals intelligence (sigint), so it is not surprising that a leading defense contractor, seeking to expand its offerings, would acquire an important sigint company. The contractor, New York-based EDO Corporation (NYSE: EDO), has also just acquired a premier full-service provider. The list of products and services EDO provides fills a Web page, and that list has just grown longer. http://www.cas-inc.com/

Impact Science & Technology

EDO has signed a definitive agreement to acquire Nashua, New Hampshire-based Impact Science & Technology (IST), a privately held company which provides sigint systems and analysis support to the intelligence community, and advanced information warfare (IW) countermeasures and electronic-attack systems to the Department of Defense (DoD) and other government agencies. EDO will purchase all of the outstanding shares of IST for $124 million, consisting of a cash payment of $106 million and an $18 million promissory note to be paid over three years. This results in a purchase price of $113 million net of the company’s cash balance of $11 million at the time of the offer. The definitive agreement includes a purchase price adjustment based on changes in the company’s net book value at the time of the closing. In addition, certain senior managers will receive retention payments in the form of restricted common shares valued at approximately $9 million.

EDO will fund the acquisition from its current cash balance and its existing $300 million credit facility provided by a bank group led by Citigroup Global Markets, and Wachovia Capital Markets. The transaction is expected to close in the third quarter, subject to the customary closing conditions.

IST has approximately 200 employees, with additional operations in Maryland and Colorado. Much of the work done by IST is classified. Revenue for the twelve months ending 31 March 2006 was $63 million. During the past five years, revenue has grown at a compound annual growth rate of 60 percent. IST will become part of the Electronic Systems and Communications reporting unit, and will be immediately accretive to EDO’s earnings.


EDO has also acquired Huntsville, Alabama-based CAS for $185 million. Privately held CAS provides engineering services, logistics support, and weapons-systems analysis to the Department of Defense. The purchase price of $175.6 million will include a cash payment of $170.7 million plus restricted EDO common shares valued at $4.9 million. In addition, certain senior managers will receive retention payments over a three-year period valued at $10 million. A portion of the cash payment will be made from EDO’s current cash balance, which exceeds $100 million. The remaining amount will be financed through the company’s existing, unused, $300 million credit provided by Citigroup Global Markets and Wachovia Capital Markets.

CAS is a premier full-service provider in Huntsville, a growing center for the missile-defense, aviation, and logistics programs of its largest customer, the U.S. Army. CAS has approximately 1,000 employees operating in thirteen states and on military bases worldwide. Revenue for the twelve months ending 31 March 2006 was $184.3 million. Revenue has grown steadily since the company’s founding in 1979, with annual growth averaging more than 18 percent over the past five fiscal years. The acquisition will be immediately accretive to EDO’s earnings.

The acquisition will allow EDO to strengthen our ability to serve the expanding Army presence in Huntsville, where a number of operations will be consolidated as a result of base closings mandated by the 2005 Base Realignment and Closure round. Among the services provided by CAS are system engineering and analysis support for theater missile defense, air defense, aviation, and land-combat missile systems. The company is known for supporting of the PATRIOT missile program. The current PATRIOT support contract, valued at $377 million, was awarded in October 2003 and extends until October 2008.

CAS had a funded backlog of $147 million, plus unfunded contracts and unexercised options of approximately $750 million, as of its latest fiscal year ending 31 March. The company will become part of EDO’s Engineered Systems and Services reporting segment.