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Merger Led to Big Stock-Price Gains at Argon ST

Monday, January 3, 2005; Page E03

Washington investors paid little heed last summer when a small Newington defense contractor called Sensytech announced that it was merging with Argon Engineering Associates Inc., a privately owned government supplier in Fairfax.

The deal itself was difficult to comprehend -- in reality, Argon took over Sensytech -- and so were the operations of the two companies, which are described in jargon not spoken outside Pentagon precincts.

Argon ST is a contractor on the Aerial Common Sensor program, which is to replace three current systems, including the Navy's EP-3E Aries II, above. (U.s. Navy Photo)

_____In Today's Post_____
Duratek's Stock Price Soars After Carlyle Cashes In (The Washington Post, Jan 3, 2005)
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Their business is C4SIR, an acronym for command, control, communications, computers, surveillance, intelligence and reconnaissance. In other words: electronic warfare.

That is the hottest sector of the defense business and it made the merged company, renamed Argon ST Inc., the rookie of the year in the Washington defense business, one of 2004's strongest-performing categories for Washington investors.

Argon stock was up 170 percent last year, climbing even before the merger and continuing to gain afterward despite what Advest analyst Steven Levenson describes as "an information vacuum." The closed-mouthed company has issued only one financial report since the merger and that document does not include full details of the combined operations.

Most of the company's work is classified -- so secret that the agencies it works for are described on the Argon Web site only as "national strategic users."

Levenson said Argon creates electronic-warfare hardware by adding its software to off-the-shelf computer and communications gear that is used "to collect, process and analyze electronic intelligence." Even he refers to Argon customers as "branches of the government."

The specialties of Sensytech, which include work on systems to defend ships from torpedoes, are expected to blend well with the work of Argon, Levenson said. "With everything going on in intelligence, there was a lot of excitement about the two companies combining," he said. The stock price has gone up; so much, in fact, that Advest recently reduced its rating to "hold" based on the valuation alone, not on any doubts about business.

The Sensytech-Argon marriage was a "reverse merger." Sensytech, which was smaller, but publicly traded, "acquired" Argon, but the owners of Argon wound up owning a majority of the stock. They've recently begun selling some of it, cashing in 447,000 shares for about $35 a share, according to insider trading reports.

-- Jerry Knight

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