The deal, which includes about $120 million in debt, is not expected to affect ITT's earnings in 2008, but will add to earnings thereafter, ITT said.
Stripping out the assumption of debt and the conversion of notes, the deal is worth about $1.6 billion, or $56 per share in cash, which represents a 9 percent premium over EDO's Friday closing price of $51.51.
"This is central and highly aligned to our overall growth strategy," ITT Chief Executive Steve Loranger told Reuters in an interview. "We like to grow in attractive markets where we play very well. This is a great strategic fit."
The deal is expected to close early in 2008. Financial advisor Lazard, along with UBS, is advising ITT on the acquisition.
ITT makes a range of products that include water treatment equipment and air traffic technology.
EDO, with estimated 2007 sales of $1.15 billion, designs defense electronic and communications systems, aircraft armament systems and other products, and employs about 4,000 people.
Loranger said the companies have complementary product lines, such as EDO's products for electronic warfare on the ground and ITT's products for warfare in the air.
He said the merger would produce more efficient operations and likely cost savings, but he declined to give a precise savings amount.
Shares of EDO gained $3.39, or 6.58 percent, to $54.90 on the New York Stock Exchange in early trade. ITT stock fell 45 cents to $63.85 on NYSE.