Updated from 11:35 a.m.

Shares in DRS Technologies ( DRS) surged 22% Thursday after the defense contractor revealed an unsolicited buyout proposal from rival L-3 Communications ( LLL).

L-3 offered to pay $42 a share in cash, but Parsippany, N.J.-based DRS said its board unanimously rejected the offer. DRS said it has "confidence in the company's growth prospects" and that the bid isn't in shareholders' interests.

For its part, New York-based L-3 said later Thursday that it wouldn't pursue an unsolicited transaction with DRS, but was open to talking if DRS wanted to. L-3 also said it would "continue to evaluate acquisition opportunities that create value for its shareholders."

On Thursday, DRS shares rose $7.05 to $38.95. L-3 slipped $1.41 to $65.39.