Italian defense industry group Leonardo announced the successful completion of a public offering in the United States on November 21, 2023, through its subsidiary Leonardo US Holding, LLC. The subsidiary, also known as the ‘Selling Shareholder,’ divested a minority quote, amounting to 20,700,000 common shares, in Leonardo DRS, Inc. (‘DRS’) at an offering price of $17.75 per share. The total proceeds from the offering exceed USD 367 million, including 18,000,000 ordinary shares initially offered and an additional 2,700,000 shares subject to the full call option exercised on November 17, 2023, by the underwriting banks.
DRS, a key player in the defense sector, specializes in providing advanced defense products, systems, and solutions to the US Department of Defense and allied customers. Its focus areas include supplying systems, subsystems, or components, particularly advanced electronic components for radar and sensor systems. DRS manufactures a diverse range of products, ranging from optical sighting systems for sniper rifles to infrared viewers and more sophisticated systems designed for anti-aircraft and naval applications. In essence, DRS plays a crucial role in shaping the future defense landscape.
It’s noteworthy that all the shares offered were sold by the Selling Shareholder, and DRS did not receive any proceeds from the transaction. This implies that the offering represents a sale rather than a capital increase for DRS.
The Selling Shareholder currently holds a 72.3% stake in the issued ordinary shares of DRS, and the sale was executed in compliance with regular disclosures made to the Securities and Exchange Commission (SEC). It’s crucial to clarify that this article serves as informative rather than a solicitation to purchase.
The offering was managed by prominent financial institutions, with Morgan Stanley, BofA Securities, and J.P. Morgan acting as joint book-running managers, while Baird, Goldman Sachs & Co. LLC, and Trust served as joint book-runners. Additionally, CJS Securities participated as a co-book-running manager.
This financial maneuver can be considered a form of indirect privatization for Leonardo. While the parent company doesn’t sell its shares directly, it strategically divests shares in its subsidiaries. The question now arises whether the substantial proceeds of USD 367 million will be retained for further investments by Leonardo or converted into profits distributed among shareholders, including the Italian Treasury. This decision becomes critical, especially in a period of global security uncertainty where efficient companies in the defense sector are in high demand, necessitating strategic investment for future growth and innovation.