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Electronics Production | May 14, 2008

Finmeccanica to acquire DRS

Finmeccanica and DRS have signed a definitive merger agreement under which Finmeccanica will acquire 100% of DRS stock for US$81 per share in cash.
The transaction, valued at approximately US$5.2 billion (Euro 3.4 billion), inclusive of approximately $1.2 billion in net debt, following the conversion of DRS' convertible notes, represents a premium of 27% to DRS' closing share price on May 7, 2008; it is also a 32% premium over DRS' thirty-day average stock price traded on the NYSE.

The Boards of Directors of Finmeccanica and DRS have each approved the terms of the agreement.

DRS will operate as a wholly-owned subsidiary, maintaining its current management and headquarters. As is customary in this type of transaction, DRS and Finmeccanica will comply with all national security requirements and will propose to the Defense Security Service (DSS) that the company operate under a Special Security Agreement (SSA), with its own board of directors comprised predominantly of U.S. citizens holding security clearances and a government security committee. With increased business opportunities that will arise following the transaction, it is expected that DRS will expand its overall employment base.

Financing for the acquisition will be structured so as to preserve a solid capital structure, guarantee adequate financial flexibility to further support growth and deliver value creation to Finmeccanica's shareholders.

Finmeccanica will fund the acquisition with a Syndicated Loan Facility to be taken out by a combination of equity issuance, long-term debt issuance, and divestitures of its assets. Among these will be an IPO of AnsaldoEnergia. Terms and conditions will be determined upon completion of the transaction.

The transaction is subject to approval by the stockholders of DRS, the receipt of regulatory approvals and other closing conditions, including review by U.S. Antitrust Authorities, the Committee on Foreign Investment in the United States (CFIUS) and the Defense Security Service (DSS). The transaction is expected to close by the fourth quarter of 2008.

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