US seen as unlikely to block DRS-Finmeccanica deal
WASHINGTON, May 28 (Reuters) - The proposed takeover of U.S. defense company DRS Technologies Inc. DRS.N by Italy's Finmeccanica (SIFI.MI) is unlikely to face major problems when it is reviewed by U.S. authorities, defense analysts said on Wednesday.
Thus far, despite the fact that Finmeccanica is 33 percent owned by the Italian government, U.S. lawmakers have raised no objections to the $4 billion deal -- a fact analysts attribute to Italy's status as a staunch U.S. ally and member of the coalition that supported the Iraq war.
Analysts said DRS and Finmeccanica had addressed most potential concerns in their merger agreement, including provisions to firewall the Italian parent company from the classified work done by DRS, which comprises about 17 percent of its annual revenues.
"I really don't see a lot of obstacles to the deal," said Garrick Ngai, defense analyst for Frost & Sullivan. "If it were the French, forget it."
U.S. lawmakers have passed legislation over the years to tighten scrutiny of any foreign takeovers, but this deal has not drawn any limelight thus far.
By contrast, a U.S. Air Force decision in February to award a $40 billion contract to Northrop Grumman Corp (NOC.N) and its French-German subcontractor EADS (EAD.PA) instead of Boeing Co (BA.N) has sparked a huge outcry on Capitol Hill.
Boeing backers have loudly criticized the loss of U.S. jobs to Europe and cited concerns about foreign involvement in sensitive U.S. military work.
In this case, Finmeccanica had agreed to let DRS operate as an autonomous unit with a separate board made up chiefly of U.S. citizens, under a so-called special security agreement, which limits the parent's access to information about classified work, analysts said.
Other companies might have chafed at such an arm's length arrangement, but it fits well with Finmeccanica's approach to running its businesses and was ideal for the DRS management, which has said it plans to continue its own acquisition plans.
DRS Chief Executive Mark Newman has found a novel way to survive a new wave of consolidation in the defense sector, said Loren Thompson, analyst with the Lexington Institute.
"It looks like he's being bought, but he's actually positioned himself to be a buyer with a much bigger pool of money from which to draw," he said.
Jim McAleese, a Virginia-based defense consultant, said there was "a high probability" the merger would be approved given the fact that there is little overlap between operations, as well as the special security agreement.
Former Pentagon Comptroller Dov Zakheim, now a senior executive with Booz Allen Hamilton, said Finmeccanica was clearly trying to establish a presence in the United States.
"Their profile has shot all the way up," he said, noting that Finmeccanica recently tapped Edmund Giambastiani, former vice chairman of the Joint Chiefs of Staff, to become chairman of the board of directors of Alenia North America, a key Finmeccanica subsidiary.
Alenia teamed with L-3 Communications Holdings (LLL.N) to win a large Pentagon contract for small cargo aircraft.
Another Finmeccanica unit, AgustaWestland, is a subcontractor on the Lockheed Martin Corp (LMT.N) team that is building a new fleet of U.S. presidential helicopters. (Editing by Gary Hill)
