DRS in deal talks, Finmeccanica seen as buyer

NEW YORK (Reuters) - Military engineering and electronics company DRS Technologies Inc DRS.N said on Thursday it was in talks about a potential strategic deal, but did not say which company or companies it was talking to.

Earlier on Thursday, the Wall Street Journal reported that DRS was in advanced talks to be taken over by Italian aerospace firm Finmeccanica SpA (SIFI.MI).

DRS shares jumped 13 percent in early trading on the New York Stock Exchange, to $72.11, giving the company a market value of just over $3 billion.

Finmeccanica, which is 34 percent owned by the Italian government, declined comment on the matter.

The Italian company is one of the most successful foreign aerospace and defense contractors in the United States, with big roles in a number of high profile military and commercial programs.

Its AgustaWestland unit is building the next U.S. presidential helicopter fleet in conjunction with Lockheed Martin Corp (LMT.N), and its Alenia unit is making major fuselage parts for Boeing Co's (BA.N) new 787 Dreamliner.

DRS, based in Parsippany, New Jersey, makes engineering and electronics products such as power generators, radios and sensors, mostly for military use. It made a major expansion in 2006 when it bought Engineered Support Systems Inc for about $1.9 billion.

A deal with Finmeccanica would be a further sign of European companies' hunger for a share of the growing U.S. defense market, which accounts for half the world's military spending.

Britain's BAE Systems Plc (BAES.L) has led the charge, buying armored vehicle maker United Defense Industries Inc for $4.2 billion in 2005 and body armor and truck maker Armor Holdings for $4.1 billion last year.

Rival EADS (EAD.PA), the parent of Airbus, bought emergency response firm PlantCML for $350 million in April.

In February, Northrop Grumman and partner EADS unexpectedly defeated Boeing in the competition to build a new fleet of refueling tankers for the U.S. Air Force, worth $35 billion. Boeing has since protested the award.

If the Northrop/EADS team keeps the contract, the tanker planes -- based on Airbus' A330 commercial jet -- are set to be assembled at a new plant in Mobile, Alabama.

(Reporting by Bill Rigby, editing by Gerald E. McCormick and Dave Zimmerman)