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Kratos Defense Closes Purchase Of Sacramento Aircraft Producer

Kratos Defense & Security Solutions Inc. said recently that it closed its purchase of drone aircraft maker Composite Engineering Inc., sewing up the $155 million deal nearly two months after it was first announced.

CEI, based in Sacramento, produces jet-powered target drones for the U.S. Air Force, U.S. Navy and international customers.

The acquired company had $94 million in revenue in 2011 and an organic growth rate of more than 25 percent over 2010, Kratos reported, adding that CEI has a backlog of $160 million.

Kratos will pay $135 million in cash and $20 million in stock for CEI.

Kratos already owns businesses that supply electronics and avionics for CEI aircraft. Kratos also provides ground flight-control stations and electronics for the command and control of CEI aerial systems.

As the company name implies, the aircraft are made from composite materials. The drones are capable of skimming along the surface of the ocean and flying at up to 50,000 feet, and can move at supersonic speeds.

“With this transaction, we expect to accelerate our rapid prototyping and development of new vehicles with ever evolving electronic payloads, advanced avionics and satellite communications capabilities, all of which Kratos brings to the combined organization,” said CEI Executive Vice President Mike Fournier when the deal was first announced in May.

Fournier called Kratos and CEI “a great fit.”

As an incentive to stay with the company, members of CEI’s management team have been offered stock options that will vest after four years.

At the same time it announced the close of the CEI purchase, Kratos said that it reorganized the parent company into five operating divisions, and that it plans to divest some of its small business lines. It promised more details of the divestitures when it reports second quarter results.

Kratos stock trades on the Nasdaq under the symbol KTOS. Shares closed July 3 at $5.97. As of July 3, the stock’s 52-week range was $4.61 to $12.42.

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