AeroVironment [AVAV] on Wednesday said it has agreed to acquire Arcturus UAV for $405 million in a deal that will expand its portfolio of unmanned aircraft systems (UAS) into larger products and position it in more lucrative programs.

Arcturus develops and produces Group 2 and Group 3 UAS systems, which have maximum takeoff weights of between 21 and 55 pounds, and less than 1,320-pounds, respectively. AeroVironment develops and manufactures smaller hand-launched UAS in the Group 1 category.

“We are excited about the opportunities for value creation through our acquisition of Arcturus UAV, which will enable us to accelerate our growth strategy and expand our reach into the more valuable Group 2 and 3 UAS segments,” Wahid Nawabi, president and CEO of AeroVironment, said in a statement. “Group 2 and 3 UAS and services, collectively, potentially represent more than $1 billion in annual contract value, according to an independent forecast. Combining our highly complementary products and technologies will enhance our portfolio, deliver top and bottom-line growth, and enable us to provide customers with a complete set of Group 1 through 3 UAS, tactical missile systems, high-altitude pseudo-satellites and unmanned ground vehicle solutions. Through this expanded portfolio, we will be well positioned to serve a broader range of customer missions across multiple domains and significantly enhance value for shareholders over the near and long-term.”

Excluding the Arcturus transaction, which is expected to close during AeroVironment’s fourth quarter fiscal year 2021 that closes in April, the company is forecasting sales in FY ‘21 between $390 million and $410 million. AeroVironment expects the acquisition to be immediately accretive to its adjusted operating earnings.

AeroVironment said that Arcturus has grown its sales more than 20 percent each of its last two fiscal years. Arcturus had $84 million in sales for the year-period that ended last September.

Arcturus, which like AeroVironment is based in California, supplies U.S. Special Operations Command on the $1.4 billion Mid-Endurance UAS III and IV programs with its Jump 20 vertical take-off-and-landing system. Arcturus competes with five other companies on the MEUAS program, including Boeing’s [BA] Insitu, L3Harris Technologies [LHX], Textron [TXT], Precision Integrated Programs, and Wildflower International.

Arcturus is also one of four companies that the Army is funding for development and demonstrations under the potential billion-dollar Future Tactical UAS program that also includes L3Harris, Textron and Martin UAV.

Arcturus’s UAS products include the JUMP-20 and the catapult-launched medium-endurance T-20. The company’s systems can carry a broad range of payloads for intelligence, surveillance, reconnaissance, mapping, communications relay, and communications and signals intelligence.

Arcturus said that as part of AeroVironment it will have access to more resources and technology to meet global demands. Key members of the company’s executive team will remain with the company, which will operate as a subsidiary of AeroVironment.

Arcturus has about 270 employees. The company’s financial adviser is Evercore and AeroVironment is being advised by Jefferies.

The deal is being funded by $355 million in cash and $50 million in AeroVironment stock

Arcturus also provides ground control stations, training and support, and contractor-owned and operated services with its products.

In December, AeroVironment acquired Germany’s Telerob, marking the company’s entry into the unmanned ground vehicle market.