US defense major General Dynamics Corp Inc. yesterday confirmed a deal to acquire Axsys Technologies Inc., leading maker of high-performance surveillance and imaging systems at a cost of $643 million.
 
The agreed purchase price for Axsys is $54 a share. The company has more than 11.5 million common shares outstanding as of the end of March.

It was announced that boards of both the companies approved the proposed deal. Pending further approvals from regulatory agencies as well as Axsys shareholders, it is expected that the deal would be concluded in the third quarter.

Virginia-based defense contractor said in a statement that the acquisition would be earnings-neutral in 2009 and would be added to General Dynamics' earnings from next year onwards.

It is expected that Axsys will form part of the General Dynamics Advanced Information Systems (GDAIS), a business unit of General Dynamics dealing with mission critical information systems and technologies.

GDAIS president Lou Von Thaer said, ''Axsys Technologies delivers innovative, high-value products in a market segment that is strategic for GDAIS.''

''Adding Axsys Technologies' capabilities to our existing intelligence, surveillance and reconnaissance expertise will enable us to further strengthen our portfolio of offerings and discriminators in the high-growth tactical ISR (Intelligence, Surveillance and Reconnaissance) market.'' Thaer added.

Axsys chairman and CEO Stephen Bershad said he is extremely proud of the organisation that Axsys has become, successfully executing strategies to transform the company into a premier supplier of optical solutions for surveillance, reconnaissance and targeting applications. 

He further stated: ''As part of General Dynamics we will be even better positioned to capitalise on the substantial opportunities in our markets.''

Connecticut-based Axsys is a global leader in design and manufacture of high-performance electro-optical infrared systems, multi-axis stabilised HD cameras, infrared lenses, optical systems and components, and motion control products for application in defense, security and high performance commercial markets including aerospace, energy, broadcasting and film production.

The company was in the lookout for strategic options including sale since March.

Axsys has four units in the US and employs around 1,000 people. The company's estimated turnover for 2009 is $280 million. Analysts expect that the offer price corresponds to an estimated 2009 earnings multiple of around 11 before interest, taxes, depreciation and ammortisation.

General Dynamics is one of the largest defense equipment manufacturers in the world covering marine and combat systems, information systems, technology and aerospace.
The company has about 92,000 employees worldwide and recorded $29.3 billion sales in 2008 and a net income of around $2.46 billion.

Nicholas Chabraja, who has been at the reins of General Dynamics for more than a decade expanded the GDAIS through a series of acquisitions to become the largest supplier of battlefield communication systems and computers for the US Army.

The takeover would reinforce General Dynamics' capabilities in surveillance and optical solutions for intelligence systems, a thrust area of US Defense Department and enable the company to take on its major rivals Raytheon (Massachusetts), BAE Systems plc (England) and FLIR Systems Inc. (Oregon).

Axsys shares surged 7 per cent yesterday to $53.51 from Wednesday's close of $50.

Shares of General Dynamics ended 0.9 per cent up at $59.10.