UPDATE 1-Veritas Capital to buy CPI Int'l for $19.50/share

Fri Nov 26, 2010 8:09am EST

* Deal at 35 pct premium to Wednesday close

* Shares rise 29 pct pre-market

Nov 26 (Reuters) - CPI International Inc CPII.O agreed to be bought by an affiliate of private-equity firm Veritas Capital for $19.50 per share in cash, three months after larger rival Comtech Telecommunications (CMTL.O) dropped plans to buy the telecom equipment maker.

The offer from New York-based Veritas Capital, which focuses on the defense and government-services sector, is at a 35 percent premium to CPI's Wednesday close. The deal is valued at about $525 million, CPI said.

In September, Comtech had offered to pay about $372 million in cash and issue about 4.4 million shares for CPI, in what could have been its largest acquisition ever. [ID:nSGE6490PZ]

Veritas Capital also owns Aeroflex Inc, a provider of microelectronic and testing equipment to aerospace markets, and Vangent, which provides information management and business processing services.

Earlier this year, Veritas sold military-services contractor DynCorp International to Cerberus Capital Management [CBS.UL] for $1 billion.

Shares of Palo Alto, California-based CPI, which makes microwave and radio-frequency products for defense, communications, medical and other applications, rose 29 percent to $18.65 in trading before the bell.

They have risen 43 percent over the last year. (Reporting by Saqib Iqbal Ahmed in Bangalore; Editing by Vinu Pilakkott and Don Sebastian) ((saqib.ahmed@thomsonreuters.com; within US +1 646 223 8780; outside U.S +91 80 4135 5800; Reuters Messaging saqib.ahmed.reuters.com@reuters.net))