Raytheon, the $25-billion US-based defence contractor, today said it has agreed on a $490-million deal to acquire intelligence and reconnaissance products company Applied Signal Technology Inc (AST).

The acquisition will enhance Waltham, Massachusetts-based Raytheon's capabilities across the full spectrum of integrated sensor solutions for classified and other government customers.

Based in California, AST is a leading provider of advanced intelligence, surveillance and reconnaissance (ISR) products, digital signal-processing equipment and other systems that are used by governments in counterterrorism.

AST manufactures tactical signals and communications intelligence (SIGINT/COMINT) systems, data fusion and information operations/information assurance products while Raytheon is the world leader in sensor technology, programme management, mission support and system integration. The combination will help Raytheon expand the range of intelligence and defence products.

The company sells 90 per cent of its products to classified customers. Its portfolio includes secure broadband network communications, cyber intelligence systems, software and analytics for sophisticated cyberspace threats, electronic warfare solutions and other advanced capabilities that enable customers to detect, evaluate and respond to potential threats.

These systems are deployed on a range of strategic platforms worldwide.

Under the deal, Raytheon will pay AST shareholders $38 a share, representing a premium of 8.5 per cent to AST's closing price of $35.02 on 17 December 2010, valuing the company at $490 million.

Post completion of the transaction, AST will be integrated into Raytheon's Space and Airborne Systems (SAS) business, Raytheon said in a statement.

"Applied Signal aligns with our strategy of expanding participation in our customers' principal areas of need, particularly ISR systems," said Rick Yuse, president, SAS. "Joining Raytheon's radar, electro-optical/infrared sensors, and communications technologies with Applied Signal's SIGINT/COMINT systems will enhance our ability to deliver a full spectrum of integrated sensor solutions."

The deal is expected to close in the first quarter of calendar 2011.

Raytheon, with 2009 sales of $25 billion, is a technology and innovation leader specialising in defence, homeland security and other government markets throughout the world.

Raytheon provides state-of-the-art electronics, mission systems integration and other capabilities in the areas of sensing, effects and command, control, communications and intelligence systems, as well as a broad range of mission support services.