Shares of CSRA Inc., an internet technology company, soared more than 31 percent before the opening bell Monday.
President Donald Trump signed a budget bill on Friday that provides $700 billion for the Pentagon, giving it $94 billion more this budget year to spend on troops, training, ships and other hardware. It's the biggest year-over-year windfall since the budget soared by 26.6 percent in 2003, when the nation was fighting in Afghanistan, invading Iraq and expanding national defense after the 9/11 attacks.
Next year, the figure is expected to jump to $716 billion.
General Dynamics said that it will pay $40.75 per CSRA share. That's a 32 percent premium to its Friday closing price of $30.82. The deal includes an additional $2.8 billion in debt.
Chairman and CEO Phebe Novakovic said in a printed statement that the acquisition will help General Dynamics provide cost-effective internet technology solutions to the Department of Defense, intelligence community and federal civilian agencies.
The defense sector has made huge gains over the past year under the new administration with a number of friction points rising globally.
The Standard & Poors 500's index that traces aerospace and defense stocks has risen almost four times as fast as the S&P 500 over the past 12 months.
CSRA and General Dynamics Corp. are based in Falls Church, Virginia.
The transaction is expected to close in the first half of the year.