Shares of Simi Valley-based drone company AeroVironment shot up more than 25% on Jan. 14, the day after the company announced a $405 million acquisition of a privately held military drone provider.

AeroVironment is acquiring Arcturus UAV, a major provider of Group 2 and 3 unmanned aircraft systems to the U.S. military, for $405 million. AeroVironment shares closed at $96.17 on Jan. 13, just before the deal was announced, and were trading at $120 throughout the day on Jan. 14.

The deal includes $355 million in cash and $50 million in AeroVironment stock and was unanimously approved by both companies’ boards. Arcturus, which is based in Petaluma, has about 270 employees, and is one of four awardees selected for funded development and demonstrations supporting the U.S. Army Future Tactical Unmanned Aircraft Systems program.

By bringing in Arcturus, AeroVironment will be able to use the company’s specialties on current and future contracts for U.S. military drones, AeroVironment said.

“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, AeroVironment’s president and CEO, said in a news release. “Group 2 and 3 UAS and services, collectively, potentially represent more than one billion dollars in annual contract value, according to an independent forecast. … 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.”

The transaction is expected to finish during the fourth quarter of AeroVironment’s fiscal year 2021, with Arcturus UAV acting as a wholly-owned subsidiary of AeroVironment.