Finmeccanica buys DRS as foreign firms seek U.S. defense contracts

According to an article on Bloomberg, "European defense contractors have sought work and acquisitions in the U.S., where military spending has grown faster than in their home markets. BAE Systems Plc, Europe's largest weapons maker, bought Jacksonville, Florida-based Armor Holdings Inc., the biggest maker of armor for Humvee transports, last year for more than $4.1 billion."

Now an Italian firm is bidding $5.2 billion for DRS Technologies (NYSE: DRS). According to the same article in Bloomberg, the acquiring firm, Finmeccanica, makes carbon-fiber frames for Boeing Co. (NYSE: BA)'s 300-seat 787 Dreamliner, and its AgustaWestland helicopter division has a supply contract with Lockheed Martin Corp. (NYSE: LMT) for the U.S. presidential fleet. DRS makes flight recorders, sensors and thermal-imaging devices that are used on U.S. military helicopters and ships.

Finmeccanica is partly owned by the Italian government. An acquisition like this rounds out the Italian defense supplier's product-line and positions it well to penetrate U.S. military spending. Much of the premium paid by the Italians has been realized already as the venerable Wall Street Journal reported of the possible deal last week.

Zack Miller is the managing editor of IsraelNewsletter.com and a former equity analyst for a leading multinational hedge fund.