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ATK To Acquire Mission Research Corp. (Jan. 28)

MINNEAPOLIS --- ATK (Alliant Techsystems) has agreed to acquire Mission Research Corporation (MRC) in a strategic transaction that will enable an advanced aerospace and defense technology pipeline spanning concept development to full-scale production.

The cash transaction, which is subject to regulatory approval and MRC shareholder approval, is expected to close in March.

Headquartered in Santa Barbara, Calif., MRC is a leader in the development of advanced technologies that address emerging national security and homeland defense requirements. Over more than three decades MRC has earned an impressive reputation as a national asset in such key areas as directed energy; electro-optical and infrared sensors; aircraft sensor integration; high-performance antennas and radomes; advanced signal processing; and specialized composites. Each of these areas is attractive in its own right, but of significantly greater potential value when coupled with ATK’ s precision weapons and energetics capabilities.

MRC, which was founded in 1970 and is privately held, has anticipated annual sales of between $170 million and $180 million in the current year. The company has approximately 560 employees at 16 facilities in 10 states. Customers include aerospace and defense prime contractors, major commands and research and test centers within each of the U.S. military services, and a number of government agencies, including the Defense Threat Reduction Agency, the Defense Advanced Research Projects Agency, the Department of Homeland Security, NASA, and the Los Alamos, Sandia, and Lawrence Livermore national laboratories.

The company serves as the prime contractor on a number of significant technology programs, including Big Safari, a U.S. Air Force initiative that involves the integration of advanced sensor hardware and MRC proprietary software on commercial and military aircraft.

Dan Murphy, ATK chief executive officer, said MRC will provide the technology to enable ATK to meet a broader range of defense and aerospace requirements.

“This acquisition is true to our demonstrated formula for success,” said Murphy. “It is an organic growth accelerator that extends existing capabilities beyond their current potential.”

Murphy said MRC will operate as a separate profit center with added responsibility as a strategic research and development center feeding all of ATK.

“At the heart of the company’ s success is its most important asset: a cadre of world-class scientists and engineers who are committed to developing advanced technologies and leveraging those technologies into profitable products and applications,” said Murphy. “They are a resource that will benefit each of ATK’ s operating groups. In return, ATK’ s existing businesses will offer the program management and manufacturing expertise to transition MRC’ s advanced technologies through to production and fielding.”

Steve Gutsche, MRC chief executive officer, said his company is looking forward to expanding ATK’ s product lines by leveraging MRC technological innovations into increased performance benefits for ATK customers.

“With over 120 Ph.Ds, MRC has excelled at inventing and developing transformational technologies in its areas of expertise,” said Gutsche. “By joining ATK, our scientists and engineers will have many more opportunities to see their work make its way into large-scale production programs. We are also excited about being able to offer MRC customers a stronger production base and an ability to handle larger and more complex programs, which will allow us to strengthen and expand our potential offerings to them.”

The purchase price of the acquisition is less than 10 times MRC’ s current-year EBITDA (earnings before interest, taxes, depreciation, and amortization). Actual terms of the transaction will be disclosed when it is completed.

Murphy said that as a result of the acquisition, ATK now expects FY05 sales to increase between 12 percent and 15 percent. Previous guidance called for an increase of between 5 percent and 8 percent. The company continues to expect FY04 sales to be approximately $2.350 billion.

“As discussed in last week’ s third-quarter earnings conference call, strategic deployment of capital is essential to our meeting FY05 EPS guidance,” said Murphy. “This accretive acquisition is one part of our capital deployment strategy that gives us continued confidence in our guidance range of between $3.80 and $3.95.”

ATK is a $2.2 billion aerospace and defense company with strong positions in propulsion, composite structures, munitions, precision capabilities, and civil and sporting ammunition. The company, which is headquartered in Edina, Minn., employs approximately 12,600 people and has three business groups: Precision Systems, Aerospace, and Ammunition and Related Products.

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ATK to Acquire Mission Research Corporation