The news comes after Applied Signal has spent most of the second half of this year looking for a potential partner, helping its stock more than double over the past year.
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Under the terms of the deal, Raytheon will buy Applied Signal for $38 per share which is 8.5% premium to Applied Signal’s closing share price on Friday. The company will become a subsidiary inside of Raytheon’s space and airborne systems division.
“Applied Signal brings world class technologies and talent that complement Raytheon’s strong intelligence, surveillance and reconnaissance solutions,” said Raytheon Chairman and CEO William Swanson, in a statement.
Applied Signal said it received interest from “multiple parties” since announcing its search in late August. The companies expect the deal to close in the first quarter of 2011 and is subject to shareholder and regulatory approval.
Applied Signal’s business has been bolstered in recent years in parallel with the growth in the U.S. intelligence and surveillance community since 9/11.
Shares of Raytheon were down 0.4% to $44.98 on Monday while Applied Signal’s shares rose 7.9% to $37.79.