Ukraine lessons helped drive acquisition of RADA, Leonardo DRS chief saysBy Stephen Losey
Jun 22, 08:06 PM
WASHINGTON — The planned acquisition of Israeli firm RADA Electronics Industries by Leonardo DRS is driven in part by lessons learned from the war in Ukraine, according to the head of the Arlington, Virginia-based company.
In an interview with Defense News, Leonardo DRS Chairman and Chief Executive Officer William Lynn said adding RADA’s advanced radar capabilities to its portfolio will improve the company’s ability to provide force protection capabilities to military customers and complement its integration capabilities.
And the war in Ukraine shows the increasing importance of force protection measures as the U.S. prepares for its next conflict. Ukrainian troops have been devastatingly effective in ambushing Russian armored vehicles with shoulder-launched munitions, and Lynn said the combined company’s capabilities could help the U.S. defend against similar attacks in a future war.
He pointed to the Trophy Active Protection System the U.S. Army uses on its M1 Abrams tanks, which Leonardo DRS developed in partnership with Rafael Advanced Defense Systems, and the Iron Fist systems that are now being tested on the Bradley Infantry Fighting Vehicle and use RADA radars, as an example of what the company could provide.
“When you combine RADA and DRS, you’re going to cover both of the major active protection systems we’re going to be able to provide to U.S. and European militaries, either system depending on what they need in terms of the capabilities of the vehicle,” Lynn said. “The Ukraine conflict has highlighted those force protection needs, which is one of the central strategic reasons for this merger.”
The purchase strengthens the combined company’s force protection and counter-drone capabilities and boosts its ability to compete for future programs, he said.
The companies announced the deal Tuesday. Leonardo DRS, the U.S subsidiary of the Italian defense firm Leonardo SpA, is a mid-tier defense electronics firm that primarily serves the U.S. military. RADA provides software-defined tactical radars for the U.S. and Israel militaries as well as a handful of European countries.
RADA will become an Israeli subsidiary of Leonardo DRS when the deal closes in the fourth quarter. The combined company will keep the Leonardo DRS name. RADA will operate as a business unit within DRS’ advanced sensing segment.
Under the terms of the deal, Leonardo DRS will acquire all the share capital in RADA, in exchange for about 19.5% equity ownership to RADA shareholders. Leonardo DRS will assume RADA’s stock exchange listing, and is expected to trade on NASDAQ and the Tel Aviv Stock Exchange under the symbol “DRS.”
Lynn said returning Leonardo DRS to public trading will give it more financial stability and the flexibility to raise funds for further acquisitions. Predecessor DRS was listed until its 2009 acquisition by the Italian company that would become Leonardo.
Having RADA’s radar capabilities in house will be an advantage as the U.S. military develops its next generation of force protection programs, which could entail non-kinetic weapons such as microwaves and lasers, and consolidated counter-drone systems, he said.
Further into the future, Lynn sees the military increasingly shifting toward systems that fuse sensors with communications capabilities, so battlefield commanders have a single integrated system that provides them data. When this happens, he said, it will be important to have radar as a fully established part of Leonardo DRS’s portfolio, not something it has recently brought on board.
Lessons from UkraineRussia’s invasion of Ukraine and its military’s vulnerability to relatively cheap drones has underscored the importance of force protection, Lynn said, adding that the U.S. military could face similar threats in a future war. That includes short range air defenses such as the M-SHORAD program Combining RADA’s radar with Leonardo’s suite of capabilities would make providing such systems much easier, he said.
Bringing radar systems in-house will also bolster DRS’ ability to provide electronic warfare capabilities, Lynn said, which has also been a vital capability in the Ukraine war.
Lynn said Leonardo DRS is not now directly selling its systems to Ukraine, but it has sold targeting systems for armored vehicles to Germany and Sweden that those nations could provide to Ukraine.
Leonardo DRS and RADA have worked together several times over the years, most notably on the Army’s M-SHORAD, or Maneuver Short Range Air Defense program. Lynn said that familiarity will ease the merging of the two companies.
“When you merge two companies together, you worry about the cultural fit. If you have to strangers, that’s a lot more risk,” Lynn said. “Knowing each other as well as we do, we’re quite confident that we’re going to work well together.”
And he does not expect any issues to emerge in the regulatory process that could disrupt the deal.
RADA chief executive Dov Sella said in the Tuesday that the combination of the two tech-focused defense companies, with both an international presence and involvement in key U.S. defense programs, will benefit both firms’ shareholders and increase RADA’s competitiveness.
“The transaction represents the first time a major U.S.-based defense company backed by a global defense prime has acquired a significant Israeli defense technology company,” Sella said. “This unique transaction will strengthen the Israeli defense industry and set trends and direction for the future.
The merged companies hope to become a market leader in force protection and integrated multi-domain systems.