Military contractor Kratos Defense and Security Solutions Inc. plans to offer $300 million in shares for sale to raise money for expansion and other uses.
Kratos (Nasdaq: KTOS) is based in San Diego, but its subsidiary Kratos Unmanned Systems Division is based in Sacramento, where it has manufacturing off Raley Boulevard, logistics at McClellan Park and engineering in an office in Roseville.
The company said it will use the proceeds for long-term investments in facilities and expanding manufacturing capacity, expansion of contract opportunities and general corporate purposes, which could include paying down debt.
Kratos filed a statement with the Securities and Exchange Commission on Wednesday to sell $300 million in shares, and its underwriters have the option to buy up to $45 million more shares of common stock.
The investment banks managing the offering are Milwaukee-based Robert W. Baird & Co. Inc.; Toronto-based RBC Capital Markets, a subsidiary of Royal Bank of Canada (NYSE: RY); and Atlanta-based Truist Securities, a subsidiary of Truist Financial Corp. (NYSE: TFC). Those investment banks are being supported by Los Angeles-based B. Riley Securities and Florida-based Raymond James Financial Inc. (NYSE: RJF) as passive book-runners for the offering.
The SEC filing states that Kratos is raising money to “further strengthen the company’s balance sheet in anticipation of upcoming customer and partner decisions and source selection on additional large, new program and contract opportunities."
Kratos is in the running for a number of military contracts, including for military satellites, hypersonic missile systems and autonomous military aircraft.
The locally relevant contracts relate to a program sought by the Air Force for next-generation drone combat aircraft. Those aircraft will have autonomous software to enable them to fly missions or to fly alongside manned combat aircraft. Kratos has been flying its XQ-58 Valkyrie autonomous unmanned jet since 2019.
Kratos Unmanned developed that plane because the U.S. Air Force Laboratory was seeking a stealth, low-cost, unmanned escort combat aircraft.
The Air Force is expected to pick, perhaps by the end of this year, the first increment of companies to further designs for the aircraft, according to Defense News. The Air Force will pick another round of plane developers for a second increment following that.
The timing of the stock offering is subject to market conditions, the company said.
Kratos manufactures technologies including unmanned aerial vehicles, target drones, communications equipment, microwave electronics and space systems, including satellites and antennas.
Kratos had revenue of $1 billion in 2023, up 15% from the previous year.
For years, Kratos in Sacramento has manufactured jet-powered target drones for the military to practice shooting down incoming planes and missiles in live-fire exercises. The Valkyrie, in contrast, is designed as a subsonic surveillance tool and potential offensive weapon. It can carry multiple weapons configurations and a mix of lethal weapons from its internal bomb bay and wing stations. It has the potential to use artificial intelligence-enabled platforms for air patrol missions.
The Valkyrie aircraft is manufactured at a Kratos factory in Oklahoma City, but its systems, subsystems and mission kits are engineered in the Sacramento area.
Kratos Unmanned has more than 450 employees in the local area, according to the Sacramento Business Journal's most recent list of the largest manufacturers in the Sacramento area.
