Including approximately $120 million of net debt and the anticipated conversion of convertible notes, this transaction values EDO at $1.7 billion. The transaction is expected to be neutral to ITTs earnings per share in 2008, and accretive thereafter.

"This combination is all about growth and demonstrates our disciplined approach to creating value for our shareholders by expanding from our strong core businesses and entering attractive adjacent markets," said Steve Loranger, chairman, president and chief executive officer of ITT. "ITTs continued strong overall performance this year gives us the capability to make this key acquisition, which will be a powerful addition to our existing business. EDOs extremely talented people, complementary technologies, and customer relationships, when joined with ITTs strong defense team, will enable us to reach new heights in meeting the changing needs of our military and civil customers."

EDO is a leader in the design and development of advanced systems at the center of the militarys transformation to lighter, faster, and smarter defense capabilities. EDO has grown revenues at a compound annual growth rate of almost 16 percent over the last three years, and is positioned to grow at approximately 60 percent in 2007 to its current-year forecast of approximately $1.15 billion.

"We believe this is an excellent strategic fit and offers shareholders tremendous value," said EDO Chief Executive Officer James M. Smith. "It substantially increases our business scale and opens new opportunities in defense markets. We expect employees and customers to benefit substantially from the combination of our technology-driven businesses."

The transaction, which is subject to approval by EDOs shareholders, as well as customary closing and regulatory conditions, is expected to close in early 2008.

Poised for growth

EDOs attractive positions in defense electronics add to ITTs well- established sensing and surveillance capabilities. In tactical communications, ITTs leading position in battlefield communications is complemented by EDOs expertise in mobile networking and integration, interference cancellation and antennas. Both companies offer engineering and professional services to a diverse customer base, serving all branches of the military and civil agencies.

"Were bringing together two successful defense organizations into one team with one mission: To meet the needs of our customers in support of our nation and its allies," said Steve Gaffney, president of ITTs defense business. "We are confident in our plan to integrate our businesses and unlock tremendous value, creating opportunity for employees, customers and shareholders."

Plays to mutual strengths

The combination capitalizes on ITTs and EDOs mutual strengths. By leveraging the diversified portfolios of both companies, the transaction positions ITT to play an important role on some of the U.S. militarys vital transformational initiatives, such as the Joint Strike Fighter, the Navys Littoral Combat Ship, counter improvised explosive device (IED) programs, and the Coast Guard Deepwater programs.

Gaffney added, "This transaction combines ITTs and EDOs technology prowess, customer relationships, and proven operational capabilities to scale mission-critical military programs and create new markets for our technologies."

In connection with the transaction, Lazard LLC and UBS Investment Bank are acting as financial advisors to ITT, and Simpson Thacher & Bartlett LLP is legal counsel. Citigroup is acting as financial advisor, and Debevoise & Plimpton LLP is legal counsel to EDO.

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