Aerospace, defense and energy company Meggitt PLC (MGGT.LN) Tuesday announced it had agreed to buy Pacific Scientific Aerospace, a leading supplier of components to the global civil aerospace and military markets, from U.S. manufacturing and technology company Danaher Corp. (DHR) for $685 million in cash.

The acquisition of PSA will add fire and smoke suppression capabilities to Meggitt's product portfolio, creating an integrated leading fire and smoke detection and suppression offering. It will increase Meggitt's exposure to major civil and military platforms, including Boeing Co.'s (BA) 787 Dreamliner, Airbus' A380, A350 and A400M and the Eurocopter NH-90.

It also strengthens Meggitt's portfolio of sensors and anti-icing products.

Meggitt Chief Executive Terry Twigger said in a statement that the deal "represents a further major step in the strategic growth and development of the Meggitt Group and fits well into Meggitt's business model, with strong technology positions, a significant level of sole source content and aftermarket sales representing over one-third of PSA's total revenues."

Meggitt said the transaction will be funded in part by an equity placing of up to 69.8 million new ordinary shares, representing less than 10% of its current issued share capital. The balance will be funded from existing debt facilities.

At 0803 GMT, Meggitt's shares traded down 14 pence, or 3.9%, at 356 pence, making it the biggest loser in the FTSE 250 index, which traded up 0.3%. They have gained 43% in value in the past year largely due to a recovery in the aviation industry.

PSA offers fire suppression, sensing, electric power, electric actuation and security products, with 57% of its revenue generated in civil aerospace and 43% in military markets. It employs 2,100 workers. PSA reported revenue of $378 million in 2010 and unaudited adjusted operating profit from trading activities before depreciation and amortization of $79 million.

Meggitt earns roughly 41% of its revenue from the civil aerospace market, 45% from the military market and the remaining 14% from other markets, primarily energy.

The deal will enhance Meggitt's low-cost manufacturing capability, with the addition of factories in Mexico and Vietnam.

Meggitt estimates cost synergies at about $5 million in 2011, rising to around $18 million a year by 2014. The one-off cost to achieve these savings is expected to be about $32 million spread over three years.

The U.K. company expects to generate cash tax benefits of up to $8 million a year for 15 years, or roughly $117 million in aggregate.

On completion of the deal, Meggitt said its gearing will be comfortably within existing debt covenants. It estimated its ratio of pro forma net debt to earnings before interest, tax, depreciation and amortization at approximately 2.5 times at June 30, 2011, and about 2 times as of Dec. 31, 2011.

Meggitt expects the deal to be earnings enhancing immediately.

Completion of the deal is dependent on regulatory clearances, including a review by the Committee on Foreign Investment in the U.S.

-By Jonathan Buck, Dow Jones Newswires; +44 (0)207 842 9237; jonathan.buck@dowjones.com