Filed by DRS Technologies, Inc.
Pursuant to Rule 425 under the Securities Act of 1933
And Deemed Filed Pursuant to Rule 14a-12
Under the Securities Act of 1934
Subject Company: Engineered Support Systems, Inc.
Commission File No. 000-13880
On September 22, 2005, DRS Technologies, Inc. and Engineered Support Systems,
Inc. issued a joint press release. The text of the joint press release
follows.
NEWS RELEASE
For information contact:
Patricia M. Williamson
DRS Technologies, Inc.
(973) 898-1500
or
Daniel E. Kreher
Engineered Support Systems, Inc.
(314) 553-4000
FOR IMMEDIATE RELEASE
---------------------
Thursday, September 22, 2005
DRS TECHNOLOGIES TO ACQUIRE ENGINEERED SUPPORT SYSTEMS
------------------------------------------------------
TRANSACTION WILL BROADLY EXPAND DRS'S GROWING POSITION IN
---------------------------------------------------------
DEFENSE TECHNOLOGY AND SERVICES;
--------------------------------
$0.20 PER SHARE ACCRETION EXPECTED IN FIRST FULL YEAR
-----------------------------------------------------
PARSIPPANY, N.J., September 22 -- DRS Technologies, Inc. (NYSE: DRS)
and Engineered Support Systems, Inc. (NASDAQ: EASI) jointly announced today
that they have signed a definitive agreement for DRS to acquire all of the
outstanding stock of Engineered Support Systems, Inc. (ESSI) for $43.00 per
share through a combination of cash and DRS common stock.
The acquisition is expected to be accretive for DRS in its first full
fiscal year of operation with DRS ending March 31, 2007, contributing
approximately $0.20 to earnings per share and approximately $1.23 billion to
revenues.
Upon completion of the acquisition, ESSI will become DRS's third
operating group, focused on support and services.
Strategic Highlights
In making the announcement, Mark S. Newman, DRS Technologies'
chairman, president and chief executive officer, commented, "The acquisition
of Engineered Support Systems will create a strong, diverse company, adding a
significant business base in technical and logistics support services,
integrated military electronics and support equipment with broad access to a
variety of government funding accounts, including procurement and operations
and maintenance (O&M). Engineered Support Systems is uniquely focused on
sustainment of military forces and respected as a rapid-response solutions
provider. The combination of the two companies will firmly establish DRS
Technologies as a leading provider of defense electronics products and
services with a run rate in excess of $2.5 billion in annual revenues and a
major role in armed forces modernization, personnel mobility and O&M support.
An important milestone in the growth of our company, this acquisition will
strengthen our strategic position and expand our program participation and
platform applications with all of the military services, while providing new
opportunities for growth in intelligence and homeland security markets."
Gerald A. Potthoff, vice chairman and chief executive officer of
Engineered Support Systems, added, "This is another exciting chapter for ESSI,
taking our company to the next level and delivering excellent value to our
stockholders. DRS Technologies is a highly-regarded presence in defense
technology, and with ESSI will become a sizable,
- more -
diversified industry competitor, strategically positioned for exciting growth
opportunities. We believe the combination will benefit customers, business
associates, investors and employees. This transaction undoubtedly will bolster
the combined company's ability to accomplish its mission to support the
military's near-term force modernization and emerging transformation
initiatives."
DRS Technologies said the acquisition offers opportunities to leverage
synergies and to accomplish several objectives. It is expected to:
o Enhance DRS's market leadership position, adding to its critical mass
and extensive array of products and significantly expanding the
company's logistics support and services business;
o Complement the company's customer base, strengthening positions with
the U.S. Army, Air Force and Navy, intelligence agencies, prime
contractors and international military forces;
o Increase access to government funding budgeted within the procurement
and O&M accounts;
o Increase content on military programs, including those related to
power generation, conversion, distribution and power management;
electro-optical and infrared (EO/IR) technology; vehicle diagnostics
and automated test equipment; and radar systems;
o Enhance technology capabilities in intelligence through satellite
communications (SATCOM)/wireless services and systems integration;
o Broaden DRS's homeland security capabilities;
o Diversify the company's program base so that no single product or
program accounts for more than 3 percent of annual revenues and the
ten largest programs account for approximately 20 percent; and
o Generate earnings accretion and strong free cash flow.
Transaction Details
Under the terms of the acquisition, each share of ESSI common stock
will be converted into the right to receive a combination of $30.10 in cash
and a portion of a share of DRS common stock valued at $12.90, provided that
the average closing price of DRS's common stock prior to the closing of the
transaction is between $46.80 and $57.20. The exchange ratio will increase or
decrease in proportion to the average closing price of DRS's common stock. A
collar provides that the exchange ratio will not exceed 0.2756 of a share nor
be less than 0.2255 of a share of DRS common stock.
The cash portion of the acquisition, together with the debt of ESSI
to be refinanced, will aggregate approximately $1.49 billion at closing. Total
consideration for the acquisition, including an estimated $88.3 million of
ESSI's debt to be refinanced at closing, is approximately $1.97 billion.
- more -
DRS expects to finance the cash portion of the acquisition by
utilizing existing excess cash on hand and through a combination of bank
borrowings and the issuance of debt securities.
"We have constructed an offer that balances prudent financing with
our objective to deliver earnings accretion and top-line growth," said Richard
A. Schneider, DRS Technologies' executive vice president and chief financial
officer. "This approach is consistent with our experience on the acquisition
of Integrated Defense Technologies in 2003, whereby we delivered on our
commitment to deleverage net debt to earnings before income taxes,
depreciation and amortization (EBITDA) from 4.0 to 2.9 in two years and
achieve meaningful earnings accretion and growth."
The transaction is expected to close before the end of DRS's fiscal
2006 and is subject to customary regulatory approvals and other closing
conditions, including approval by DRS's and ESSI's stockholders at respective
special stockholder meetings.
Bear, Stearns & Co. Inc. is serving as financial advisor to DRS on
the transaction and has provided committed financing necessary for DRS to
consummate the acquisition and for ongoing working capital needs. Merrill
Lynch & Co., Inc. also is serving as financial advisor to DRS for the purpose
of rendering a fairness opinion. Lehman Brothers Inc. is serving as financial
advisor to ESSI on the transaction.
About Engineered Support Systems
Engineered Support Systems, headquartered in St. Louis, Missouri, is
a diversified supplier of integrated military electronics, support equipment
and technical services focused on advanced sustainment and logistics support
solutions for all branches of the U.S. armed services, major prime defense
contractors, certain international militaries, homeland security forces and
selected government and intelligence agencies. ESSI also produces specialized
equipment and systems for commercial and industrial applications. Operating
through two business segments - Support Systems and Support Services - ESSI is
comprised of 14 subsidiaries and employs 3,600 people. Primary areas of
expertise include engineering, logistics and training; advanced technology;
asset protection systems; telecommunications and information technology;
integrated logistics; systems integration; heavy and light military support
equipment; power generation equipment and defense electronics systems.
About DRS Technologies
DRS Technologies, headquartered in Parsippany, New Jersey, provides
leading edge products and services to defense, government intelligence and
commercial customers. Focused on defense technology, DRS develops and
manufactures a broad range of mission critical systems. The company employs
6,000 people worldwide.
For more information about DRS Technologies, please visit its web
site at www.drs.com. For more information about Engineered Support Systems,
please visit its web site at www.engineeredsupport.com.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995: This press release contains forward-looking statements, within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended, that are based on
management's beliefs and assumptions, current expectations, estimates and
projections. Such statements, including statements relating to DRS
Technologies' and Engineered Support Systems' expectations for future
financial performance, are not considered historical facts and are considered
forward-looking statements under the federal securities laws. These statements
may contain words such as "believes," "anticipates," "plans," "expects,"
"intends," "estimates" or similar expressions. These statements are not
guarantees of the companies' future performance and are subject to risks,
uncertainties and other
- more -
important factors that could cause actual performance or achievements to
differ materially from those expressed or implied by these forward-looking
statements and include, without limitation, demand and competition for such
companies' products and other risks or uncertainties detailed in such
companies' Securities and Exchange Commission filings. Given these
uncertainties, you should not rely on forward-looking statements. Such
forward-looking statements speak only as of the date on which they were made,
and the companies undertake no obligations to update any forward-looking
statements, whether as a result of new information, future events or
otherwise.
ADDITIONAL INFORMATION ABOUT THE MERGER AND WHERE TO FIND IT: DRS Technologies
and Engineered Support Systems intend to file with the Securities and Exchange
Commission one or more registration statements on Form S-4 that will include a
joint prospectus and proxy statement to stockholders of DRS Technologies, Inc.
and Engineered Support Systems, Inc. and other relevant documents in
connection with the proposed transaction. INVESTORS AND SECURITY HOLDERS OF
DRS TECHNOLOGIES AND ENGINEERED SUPPORT SYSTEMS ARE URGED TO READ THE JOINT
PROXY STATEMENT/PROSPECTUS AND OTHER RELEVANT MATERIALS IF AND WHEN THEY
BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT DRS
TECHNOLOGIES, ENGINEERED SUPPORT SYSTEMS AND THE PROPOSED TRANSACTION.
Investors and security holders may obtain a free copy of these materials (when
they are available) and other documents filed with the Securities and Exchange
Commission at the Securities and Exchange Commission's web site at
www.sec.gov. A free copy of the joint proxy statement/prospectus, when it
becomes available, also may be obtained from Engineered Support Systems, Inc.,
201 Evans Lane, St. Louis, MO 63121, Attn: Investor Relations, and from DRS
Technologies, Inc., 5 Sylvan Way, Parsippany, NJ 07054, Attn: Investor
Relations. In addition, investors and security holders may access copies of
the documents filed with the Securities and Exchange Commission by Engineered
Support Systems on its web site at http://www.engineeredsupport.com, and
investors and security holders may access copies of the documents filed with
the Securities and Exchange Commission by DRS Technologies on its web site at
http://www.drs.com. Engineered Support Systems, DRS Technologies and their
respective executive officers and directors may be deemed to be participants
in the solicitation of proxies from their respective stockholders with respect
to the proposed transaction. Information regarding DRS Technologies' directors
and executive officers is available in its proxy statement filed with the
Securities and Exchange Commission by DRS Technologies on June 30, 2005, and
information regarding Engineered Support Systems' directors and executive
officers is available in its proxy statement filed with the Securities and
Exchange Commission by Engineered Support Systems on January 31, 2005. Other
information regarding the participants in the proxy solicitation and a
description of their direct and indirect interests, by security holdings or
otherwise, will be contained the joint proxy statement/prospectus and other
relevant materials to be filed with the Securities and Exchange Commission
when they become available.
This communication shall not constitute an offer to sell or the solicitation
of an offer to buy any securities, nor shall there be any sale of securities
in any jurisdiction in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any such jurisdiction. No offering of securities shall be made except by means
of a prospectus meeting the requirements of Section 10 of the Securities Act
of 1933, as amended.
Note to Investors:
------------------
DRS Technologies will host a conference call, which will be simultaneously
broadcast live over the Internet. Mark S. Newman, chairman, president and
chief executive officer, Richard A. Schneider, executive vice president and
chief financial officer, and Patricia M. Williamson, vice president, corporate
communications and investor relations, will host the call, which is scheduled
for today, Thursday, September 22, 2005 at 9:30 a.m. EDT. Listeners can access
the call live and archived by visiting DRS's web site at
http://www.shareholder.com/drs or by visiting Thomson CCBN's institutional
investor site at http://www.streetevents.com or individual investor center at
http://www.fulldisclosure.com. Please allow 15 minutes prior to the call to
visit one of these sites and download and install any necessary audio and
virtual viewing software.
# # #