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Strategies & Market Trends : Speculating in Takeover Targets -- Ignore unavailable to you. Want to Upgrade?

To: richardred who wrote (2418)	9/21/2010 1:05:02 AM
From: richardred	Read Replies (1) \| Respond to of 7243

DEALTALK-Defense M&A deals fetching rich premiums By Soyoung Kim and Bijoy Koyitty NEW YORK, Sept 20 (Reuters) - Desire to find new growth amid looming cuts in defense spending has spurred major arms suppliers to pay top dollar to snap up smaller rivals in high-demand technologies such as cybersecurity and surveillance. French defense conglomerate Safran SA (SAF.PA) announced a $1.1 billion deal on Monday to buy U.S. security firm L-1 Identity Solutions Inc (ID.N), paying a 24 percent premium over L-1's closing price on Friday. [ID:nN20261941]. The deal valued the 4-year-old company at 17 times its forward EBITDA, or earnings before interest, tax, depreciation and amortisation -- above the average deal multiple of 7 to 9 times in the sector and 14 times what Boeing Co (BA.N) paid for security firm Argon ST earlier this year. Top weapons suppliers will pay similar rich premiums as they rush to get deeper into cybersecurity and intelligence, surveillance and reconnaissance (ISR) -- rare bright spots in an industry bracing for the first spending cutbacks since the Sept. 11 hijacking attacks -- bankers and analysts said. "I see valuations going up. These large companies have very strong cash flow and when they see their growth stagnating due to low defense spending and all, this is the right strategy for them to invest in key growth areas," said Brian Ruttenbur, an analyst at Morgan Keegan. "And there is no return for the cash. So they can afford to pay more and still make it accretive." Top executives of Boeing, Airbus parent EADS (EAD.PA) and L-3 Communications Holdings Inc (LLL.N) told the Reuters Aerospace and Defense Summit in Washington this month they will use cash on hand to make acquisitions in high-growth areas. While L-1's sale price zoomed past Street expectations, it provided Safran and BAE Systems Plc (BAES.L) with strategic assets in the world's largest defense market and the competitive M&A scene could see more prime contractors flush with cash bid up small and mid-cap security firms, analysts said. "ISR and cyber have been definitely on fire this year and we definitely expect that to continue into 2011," said Brian Coyle, analyst at GovIA, whose firm provides research government contracts and contractors. "Companies in this space are all probably all under a billion dollars in terms of market value. It's not big money for them," Coyle said. ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ NAMES DOING ROUNDS One name doing the rounds as a potential target is Applied Signal Technology Inc (APSG.O), a smaller rival of Boeing's Argon and whose products are used by U.S. defense and homeland security agencies to intercept cellphone, microwave and military communication signals. The company could draw interest from most companies that had bid for Argon, such as Raytheon Co (RTN.N), BAE Systems and Cobham Plc (COB.L), people familiar with the matter said, while adding that Applied Signal has not put itself up for sale. "Raytheon and BAE were interested in Argon and that kind of leaves open the idea for them still shopping around firms in the sector and Applied Signal fits the bill for what they might be looking for," Coyle said. The Standard & Poor's Aerospace & Defense index .GSPAERO has fallen 10 percent in the past six months on concerns about lower defense spending. Applied Signal Technology shares rose 24 percent during the same period. Also on the radar are American Science & Engineering Inc (ASEI.O), which makes X-ray systems that help organizations combat terrorism and drug and weapons smuggling, and Mercury Computer Systems Inc (MRCY.O), which makes software that processes data in military reconnaissance and surveillance. Other firms also likely to attract interest include telecommunications equipment maker ComTech Telecommunications Corp (CMTL.O); Integral Systems Inc (ISYS.O), which helps the military control ground systems and satellites; and drone maker AeroVironment Inc (AVAV.O). Meanwhile, the rich premium seen in the L-1 Identity auction could pressure diversified manufacturer 3M Co (MMM.N) to raise its tender offer for L-1 rival Cogent Inc (COGT.O), analysts said. 3M's offer price of $10.50 per share implied 8.2 times Cogent's forward EBITDA, less than half of the multiple that Safran and BAE Systems paid for L-1. Since 3M announced the deal with Cogent on Aug. 30, more than 60 percent of Cogent's shares have changed hands, according to Thomson Reuters data. Cogent shares closed at $10.76 on Monday, above 3M's offer. (Reporting by Soyoung Kim and Bijoy Koyitty; editing by Andre Grenon) reuters.com

To: richardred who wrote (2418)	11/18/2010 1:27:39 PM
From: richardred	Respond to of 7243

UPDATE 1-Ariba to buy privately held rival for up to $150 mln Nov 18 (Reuters) - Supply-management software maker Ariba Inc (ARBA.O) said it would buy privately held Dutch rival Quadrem in a cash and stock deal worth up to $150 million, to add customers like Alcoa (AA.N) and Nestle (NESN.VX) to its portfolio. Sunnyvale, California-based Ariba will pay $50 million in stock immediately and $75 million in cash, $40 million of which will be placed in escrow to satisfy potential indemnification claims. Based on performance conditions met on the third year after deal closing, Ariba will pay an additional $25 million in cash or stock, and release $25 million of cash from escrow to the extent that it has not been used to satisfy indemnification claims. Ariba, which recently sold its consulting services and BPO assets to Accenture Plc (ACN.N) for $51 million in cash, said it has also agreed to pay $10.25 million to modify a commercial arrangement previously entered into by Quadrem. The deal is set to add to adjusted earnings 12 months after close, expected in the second quarter of Ariba's fiscal 2011. In a regulatory filing, Ariba said it expects Quadrem, which is "modestly profitable," to report 15-20 percent revenue growth in 2010. Amsterdam, Netherlands-based Quadrem offers a supplier identification and verification product complementary to Ariba. Shares of Ariba, which have lost 3 percent since it reported fourth-quarter results late October, were trading up 4 percent at $19.28 on Thursday on Nasdaq. (Reporting by Swati Chitnis in Bangalore; Editing by Maju Samuel) reuters.com