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GD Buys Off Force Protection - Analyst Blog

General Dynamics Corp. ( GD ) announced that it has successfully completed the tender offer to purchase all of the outstanding shares of common stock of Force Protection Inc. ( FRPT ) for a price of $5.52 per share in cash, or approximately $360 million. The transaction is expected to be accretive to General Dynamics' earnings in 2012.

General Dynamics, earlier in November 2011, announced that it has entered into a definitive agreement with Force Protection to acquire the latter. Per the agreement, General Dynamics commenced a tender offer for all of the outstanding shares of common stock of Force Protection.

Post acquisition, Force Protection will become a part of General Dynamics Land Systems, the Sterling Heights, Michigan-based designer and manufacturer of Abrams main battle tanks and Stryker infantry combat vehicles.

Force Protection designs, manufactures, tests, delivers and supports its blast- and ballistic-protected products to increase survivability for users. It provides survivability solutions to support the armed forces of the United States and its allies. Its specialty vehicles - including the Buffalo, Cougar and Ocelot - are designed specifically for reconnaissance and urban operations and to protect their occupants from landmines, hostile fire and improvised explosive devices.

The acquisition will complement and strategically expand General Dynamics' armored vehicle business and will also add new products to the expansive portfolio of combat vehicles. Moreover, Force Protection's skilled workforce will provide high-quality support and sustainment services to an installed fleet of approximately 3,000 vehicles. Also, with this acquisition, the company will have new opportunities to serve domestic and international customers alike.

General Dynamics continues to benefit from strong congressional support for its programs in the 2011-12 defense budgets. Looking forward, key drivers include the reviving fortunes for the business jet market, its stable business of U.S. military vehicles, an ongoing share repurchase program and strong cash flow generation.

However, the company is largely tied to the U.S. defense budget, where the threat of budget cuts is looming high. Recently, in October, General Dynamics announced third-quarter 2011 operating earnings of $1.83 per share, which surpassed the Zacks Consensus Estimate of $1.77. The results of the company were 13 cents ahead of the year-ago figure of $1.70 per share.

The company presently retains a short-term Zacks #3 Rank (Hold) that corresponds with our long-term Neutral recommendation on the stock. Similarly, its peers The Boeing Company ( BA ) and Textron Inc. ( TXT ) hold short-term Zacks #3 ranks (Hold).

Headquartered in Falls Church, Virginia, General Dynamics engages in mission-critical information systems and technologies; land and expeditionary combat vehicles, armaments and munitions; shipbuilding and marine systems; and business aviation.

BOEING CO ( BA ): Free Stock Analysis Report

FORCE PROTECTN (FRPT): Free Stock Analysis Report

GENL DYNAMICS ( GD ): Free Stock Analysis Report

TEXTRON INC ( TXT ): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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