Over in Afghanistan, Textron (NYSE: TXT) just won a big land weapons contract -- and if all goes well, the deal could get even bigger.

In a $257 million contract, the company has been tapped to build an initial 240 "Medium Armored Security Vehicles" for the Afghanistan National Army, or ANA. Delivery is slated for June 2012, and the ANA could order as many as 200 additional vehicles for delivery by December 2012, in exchange for an additional $286 million.

What this means to investors
If all options are exercised, Textron's total take could reach $543 million from this single contract, or more than 5% of Textron's annual revenue stream. This isn't just good news for the company's shareholders. Going out on a limb a bit, it might also heighten Textron's chances of a buyout.

Textron's M1117 APC, on which the Afghan MASV will be based, competes directly with BAE's Bradley Fighting Vehicle and General Dynamics' (NYSE: GD) Stryker for military sales. Textron itself is pegged for 23% long-term earnings growth on Wall Street, considerably faster than General D.

In addition to building armored vehicles, Textron's other key businesses include business jets (Cessna) and unmanned aerial vehicles (Shadow.) Both business lines should appeal to General D, which builds Gulfstream business jets itself, and which recently teamed up with second-tier UAV player Elbit Systems (Nasdaq: ESLT) to regain the UAV capability it lost when it spun off General Atomics.

Foolish takeaway
Buying Textron would improve General D's position in three key markets:

  • Armored vehicles, where it competes with BAE, Navistar (NYSE: NAV), and Force Protection (Nasdaq: FRPT).
  • Business jets, where the General has encountered more trouble outmaneuvering Embraer (NYSE: ERJ), Bombardier, and Hawker Beechcraft.
  • And UAVs -- a big beneficiary of defense budgets today, and an area in which General D is outgunned by heavyweights Boeing, Lockheed Martin (NYSE: LMT), and General Atomics.

Could a merger happen? I think so. Will it? Dunno. But just in case, you might want to add Textron to your Watchlist and keep an eye on things.

Fool contributor Rich Smith does not own shares of any company named above. Motley Fool newsletter services have recommended buying shares of Embraer, and The Motley Fool owns shares of General Dynamics, Elbit Systems, Textron, and Lockheed Martin. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.