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Henry Bros. Electronics (HBE) to Merge with Kratos Defense (KTOS) to Create Leading Industry Opportunity

Henry Bros. Electronics Inc. provides technology-based integrated electronic security solutions for commercial enterprises and government agencies. The company yesterday announced a merger agreement with Kratos Defense & Security Solutions, a company providing mission critical products and solutions for U.S. national security. The move is expected to create a stronger market presence and growth opportunity for both companies.

“This transaction combines two leaders in the defense and security solutions market, creating a great opportunity for our organization, customers and shareholders,” Jim Henry, president and CEO of Henry Bros. stated in the press release. “As a much larger organization, the combined company will be better able to establish a presence in targeted markets with the potential for significant growth opportunities, as well as enhanced service opportunities in certain key markets and industries.”

Per the agreement, Kratos Defense will acquire all outstanding shares of Henry Bros. common stock for $7 per share, an aggregate of approximately $45 million in cash.

Henry and all other directors of Henry Bros. collectively hold approximately 60 percent of Henry Bros. shares outstanding, and have agreed to vote in favor of the merger. Henry also stated his commitment to buy Kratos common stock in the open market at prevailing market prices using a portion of his share of the proceeds from the merger following the transaction closing.

Eric DeMarco, Kratos’ president and CEO, noted Henry Bros. leading position in the homeland security industry, and said he recognizes the advantages of combing the companies’ efforts, products and solutions.

“Henry Brothers is clearly one of the premier Homeland and National Security Solution Providers and Command and Control Center Design Engineering and Operators in the industry today,” DeMarco stated in the press release. “We see the opportunity for significant cross selling between the two businesses, including for Henry Brothers’ proprietary first responder communications products and solutions. Additionally, we see the opportunity to cross sell into HBE’s large and established customer base Kratos’ NeuralStar and DopplerVue situational awareness, security network management, protection and cybersecurity software products.

This deal is expected to close by the end of 2010.

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