DRS Technologies Inc. has signed a definitive agreement to acquire Engineered Support Systems Inc. for nearly $2 billion in a cash and stock deal, the company said today.

DRS of Parsippany, N.J., will buy all outstanding ESSI stock for $43 per share, consisting of $30.10 a share in cash and $12.90 in DRS stock, provided DRS shares trade in a range of $46.80 and $57.20.

ESSI’s debt will be refinanced as part of the deal. With debt, the transaction is valued at nearly $2 billion.

The acquisition will diversify DRS’ business and add a significant base in technical and logistics support services, integrated military electronics and support equipment, the company said. The acquisition also complements its customer base and enhances its technology capabilities and homeland security capabilities.

On completion of the deal, ESSI will become DRS’ third operating group, focused on support and services.

ESSI of St. Louis is a holding company for 12 wholly owned subsidiaries. It manufactures integrated military electronics and provides engineering, logistics and training services primarily for the Defense Department.

The company employs about 3,300 workers and had revenue of $884 million in fiscal 2004. ESSI is No. 43 on Washington Technology’s 2005 Top 100 list of federal prime contractors, which are ranked according to their IT revenue.

DRS is financing the deal with cash, bank borrowings and the issuance of debt securities. The transaction is expected to close before the end of DRS’ fiscal year 2006, which ends March 31.

Bear Stearns & Co. Inc. served as the financial advisor to DRS on the deal.

DRS, a provider of defense electronic products and systems, employs about 5,700 workers and had revenue of $1.3 billion for fiscal 2005. The company ranks No. 75 on Washington Technology’s 2005 Top 100 list.