Herley Industries Inc., a leader in the design, development and manufacture of microwave technology solutions for the defense, aerospace and medical industries worldwide, announced that the company has signed a definitive agreement to be acquired by Kratos Defense & Security Solutions Inc. for $19.00 per share in cash. The transaction will be accomplished through an all-cash tender offer and second-step merger, and will have a total value of approximately $270 M.

John A. Thonet, Chairman of the Board, stated, “The execution of this definitive agreement represents a defining moment for Herley and Kratos and was the result of our Board’s process of reviewing various strategic alternatives to enhance shareholder value. We believe that this transaction is in the best interest of our shareholders and creates a great opportunity for our organization and customers as two of the premier Defense and National Security businesses in the industry today join forces.”

Pursuant to the terms of the definitive agreement, Kratos will commence, no later than February 25, 2011, a cash tender offer for all issued and outstanding shares of Herley common stock at $19.00 per share, without interest. Following completion of the tender offer, Kratos will acquire the remaining outstanding shares of Herley common stock for $19.00 per share in cash, without interest, through a second-step merger. The closing of the tender offer is subject to the tender of a majority of the outstanding shares of Herley common stock on a fully-diluted basis and various other customary closing conditions, including early termination under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. The acquisition is not conditioned on Kratos being able to obtain financing. The acquisition is expected to close during the first quarter of 2011.

Further details will be provided in filings with the US Securities and Exchange Commission. Jefferies & Co. Inc. served as financial advisor to Herley in connection with its review of strategic alternatives and the transaction. Credit Suisse Securities (USA) LLC also served as financial advisor to Herley in connection with the transaction. Blank Rome LLP, Blakinger, Byler & Thomas, P.C., and Barley Snyder LLC served as Herley’s legal advisors in connection with the transaction.