Stock market unimpressed by RADA merger

Published date22 June 2022
Publication titleGlobes (Rishon LeZion, Israel)
It seems that the market found it difficult to accept the calculations regarding the premium. Leonard DRS is a private company, owned by Italian company Leonard SpA, so there is no share price from which the value of RADA can be unequivocally calculated

In a conference call held by the companies after the merger announcement. Leonardo DRS CEO Bill Lynn said, "We've been conservative I think in terms of the multiples that we're using, we've used a discount from our peers. We think that even with that it provides RADA shareholders some premium against their current share price. And we think over the longer haul for investors, the expansion of multiples of the combined entity towards peer multiples as we drive that double digit EBITDA growth and get our margins into the mid-teens provides a significant opportunity."

If Leonardo DRS's original plan had been implemented, it would already be trading on the NYSE. The company was founded in the US in 1998 as DRS and between 1981 and 2008 was traded on Wall Street before being acquired by Leonardo (then called Finmeccanica) for $5 billion. In 2021, Leonardo attempted to return to Wall Street by raising $640-700 million at a company valuation of $2.9-3.2 billion. But on the day of the IPO in March 2021 demand was at a lower price than the company was aiming for was received and it decided to postpone the offering. However, Leonardo DRS continued to publish financial reports as if it were publicly traded.

Since then there have been no attempts to hold the offering again and now the merger with RADA, a publicly traded company, makes...

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