Sponsored by TCI International Inc.
www.tcibr.com
————————————————————————-
24 Sep 21. The Competition and Markets Authority said it has launched a full inquiry into Babcock’s £10m sale this month of its helicopter business to CHC Group. The regulator had said in July that it had issued an initial enforcement order, halting the sale. (Source:FT)
23 Sep 21. IMCO Group acquires innovative UAS capabilities and activities. This acquisition is a further step in IMCO Group’s expansion strategy, offering its customers complete end-to-end defense solutions for air, ground, and naval applications. IMCO Group, a leading defense provider of comprehensive solutions for air, ground, and naval applications, announced the acquisition of the assets and activities of Innocon Ltd., an innovative Israeli developer and manufacturer of Micro, Mini and Tactical unmanned aerial systems as well as mission systems for manned light airplanes.
IMCO Group acquires Innocon’s assets and activities through one of its subsidiaries who, among other activities, provides unprecedented aerial and aviation capabilities and solutions to meet the challenges of the modern defense, homeland security and civilian markets. This subsidiary acquired Innocon’s assets and activities for NIS 3 m, plus an additional amount equal to 25% of the subsidiary’s net profit during 72 months from January 1, 2022, and up to a total and cumulative ceiling of NIS 1,750,000.
Leading IMCO Group’s aerial and aviation activities, IMCO’s subsidiary will combine the newly acquired capabilities with the advanced capabilities existing within IMCO Group’s other subsidiaries and utilizing IMCO’s global production, project management and marketing capabilities, and Innocon’s unique technology and solutions.
Eitan Zait, IMCO Industries CEO: “As a leading group in the defense industry, IMCO is pleased to announce that we have completed another step in our expansion strategy and acquired the assets and activities of Innocon, an innovative UAS developer and manufacturer. As a leading integrator of comprehensive defense solutions, we will keep offering our customers affordable and innovative tactical terrain dominance solutions that include the utilization of unmanned aerial, ground and maritime vehicles, controlled by a central command center integrating unique advanced software and artificial intelligence solutions.”
Founded in 1974, IMCO Industries Ltd. (Tel Aviv Stock Exchange TASE: IMCO) is a leading defense provider of comprehensive solutions for air, ground, and naval applications. With advanced design, global mass production, and project management capabilities, IMCO Group offers unique Tactical Terrain Dominance solutions that offer scalable tactical superiority using unmanned aerial, ground and maritime vehicles equipped with sensors and communication solutions, controlled by a central command center integrating a unique situational awareness video system. IMCO, together with its subsidiaries, affiliates and partners, provides system level tactical solutions with unmatched performance for the defense, HLS and security markets.IMCO is a sole supplier of armed forces and defense companies. IMCO has been a trusted supplier and partner of the defense industry for nearly five decades. The company has been involved in generation after generation of some of the most reliable fighting vehicles, including the Merkava tank and the Namer APC. https://www.imco-ind.com/#a-stronger
23 Sep 21. General Lattice Raises $1m in Pre-Seed Funding Led by AP Ventures. General Lattice, an advanced computational and digital manufacturing company, announced today it has raised $1m in pre-seed funding led by AP Ventures LLC, the strategic investment arm of All Points Logistics LLC. The capital will bolster General Lattice’s Federal, commercial, and R&D initiatives related to the exploration and integration of advanced lattice geometries.
“We have the support of a partner with proven processes,” said Nick Florek, chief executive officer of General Lattice. “All Points continues to deploy optimized practices based on over 20 years of government contracting and will allow us to create an environment for passionate innovators in the computational design and digital manufacturing industry.”
All Points Logistics LLC is a leading engineering, software development, and technology firm that provides high-value services and solutions to NASA, the Department of Defense, and other Federal customers. All Points is headquartered in Merritt Island, Florida, with offices in Houston, Huntsville, and northern Virginia. This latest fundraising round will enable General Lattice to invest resources into a recently secured R&D contract with the U.S. Army Combat Capabilities Development Command Soldier Center (DEVCOM SC). Additionally, a portion of the new capital will be dedicated to expanding the Company’s commercial and Federal customer base in the continental United States, and to continue the development of parametric design tools to simplify lattice generation processes. This financing raise comes as General Lattice scales to meet the strong demands of a burgeoning Additive Manufacturing (“AM”) industry. Having identified lattice architectures as an indispensable element for success in additive applications, General Lattice views this early-stage capital as an opportunity to further demonstrate the unique capabilities of lattice structures and facilitate the widespread adoption of AM technology. (Source: BUSINESS WIRE)
21 Sep 21. Meggitt set to become latest UK engineer to fall into foreign hands. Government unlikely to intervene as shareholders back £6.3bn offer from US rival Parker Hannifin Meggitt, which has its headquarters in Coventry, is one of the few independent British aerospace suppliers. Its customers include Airbus, BAE and Boeing. Meggitt is poised to become the latest British engineer to fall into foreign ownership after its shareholders overwhelmingly backed a £6.3bn takeover offer from a US rival. The majority of investors voted in favour of the takeover by Parker Hannifin, its Ohio-based rival and industrial group, at a general meeting on Tuesday. The vote ends a turbulent few weeks for the FTSE 100 group, which had been the subject of a rival approach from TransDigm before the US aircraft parts maker pulled out earlier this month. Meggitt’s board, led by chair Sir Nigel Rudd, had recommended the 800p a share offer from Parker Hannifin, which was 100p less than the preliminary approach by TransDigm.
Tom Williams, chair and chief executive of Parker Hannifin, said he was “confident the combination of Meggitt and Parker creates a world class provider of engineered aerospace solutions”. “The legally binding commitments we offered alongside our recommended offer underline our intention to be a responsible steward of Meggitt, and we are engaged with the UK government to finalise the commitments,” he added. Analysts said they thought it unlikely that the UK government, which has grown increasingly concerned about the current spate of takeover deals for British companies, would intervene in the transaction. The British government had said it was taking an “active interest” in the deal. Meggitt is one of the few independent British aerospace suppliers. Its customers include Airbus, BAE and Boeing. Williams told the Financial Times in August that he was open to talking to ministers to ease concerns over the impact of the deal on the workforce and research and development. This included going into “more detail about the content and about the duration” of initial pledges made by the group, “including the timing of them”. As part of the deal, Parker has agreed to make a number of legally binding commitments, including to at least maintain R&D spending at the UK company for the next five years. Other pledges, however, including ones to maintain technology and manufacturing in the UK, would expire after 12 months. MPs and unions have warned that the UK risks losing control of industrial assets that are crucial to the armed services. Parker has made a number of acquisitions in recent years, including a $4.3bn purchase of filtration manufacturer Clarcor in 2017 and a $3.7bn takeover of Lord Corp, the diversified technology and manufacturing group, in 2019. (Source: FT.com)
22 Sep 21. An undervalued micro-cap on the road to recovery. A supplier of products and services for training engineers in the defence and civilian sectors is winning new contracts and increasing the proportion of high margin software sales in the mix.
- First half operating loss of £1m on revenue of £7.4m narrows from £2.5m loss in first half of 2020.
- £1m annual cost savings now being realised.
- Order book worth £26m for delivery through to June 2024.
- Strategic move to increase high margin software sales in the mix.
- £1.5m software contract awarded since half-year period end.
- Software, services and repeat build generic products account for 80 per cent of technical training unit’s £25m sales pipeline
- Integrated product support division has £14m sales pipeline.
Pennant (PEN:30p), an Aim-traded supplier of products and services that train and assist engineers in the defence and civilian sectors, is well on course to recoup all its first half adjusted pre-tax loss of £1.05m in the second half, and move into sustained profit in 2022. Indeed, chief executive Phil Walker is comfortable with WH Ireland’s full-year pre-tax profit estimate of £0.1m on revenue of £16m given that £7.2m of the £26m order book is slated for delivery in the second half.
The loss was flagged up three weeks ago in a pre-close trading update, the major issue being the company’s longstanding contract to provide electro-mechanical trainers and computer-based training for the Ajax fighting vehicles to the British Army. Supply chains issues, workplace restrictions and engineering complexity in emulating a vehicle (which itself is undergoing review and development) means that the planned schedule will not be completed until the first quarter of 2022. When Pennant reported its annual results in late April (‘Exploiting companies under the radar, 28 April 2021), the board had expected to book £2.1m of revenue from the contract in the first half of this year and a further £0.6m in the second half. Instead, Pennant booked £1.8m in the first half and a further £1m is slated for the second half, the shortfall effectively accounted for the company’s first half operating loss. However, there are strong grounds for optimism.
Reasons for optimism
Firstly, Pennant’s integrated product support (IPS) division is growing beyond its traditional defence base with new customers being acquired in new sectors including commercial aviation and space exploration. The unit already has two valuable government multi-year contracts (£5.4m of annual revenue) with the Canadian and Australian defence departments to use Pennant’s Oracle-based OmegaPS software product (reduces the support cost of major capital equipment).
Pennant is now reaping the upside from its 2019 acquisition of Absolute Data Group (ADG), a Brisbane-based software company that assists clients to manage vast quantities of maintenance and training data (military aviation, commercial aerospace, and marine, rail, nuclear and automotive sectors). ADG has a high margin (90 per cent gross margin on software license sales, and 50 per cent on maintenance work) sales pipeline worth £14m for clients in Canada, USA, Australia and India. It is converting it, too. Since the half year-end, it has been awarded a £1.5m contract of which £1.2m will be delivered in 2022. Effectively, this means that the division, which traded at break-even in the first half on flat sales of £2.6m and is “on track for revenue of £5.8m for the full-year”, will enter 2022 with a £7.8m order book for delivery next year and that excludes any further potential contracts that could be converted into firm orders.
Secondly, the board is addressing the challenges faced in its technical training division and the lumpiness of orders by targeting a greater proportion of revenue derived from Software-as-a-Service (SaaS) activities. This makes sense given the focus on smart technologies amongst training providers and Pennant’s ability to deliver innovative software-based training solutions including virtual reality and sophisticated vehicle platform emulations. The strategy is working as Walker revealed during our results call today that Pennant has won a six-figure contract to develop a prototype simulation for a major national railway infrastructure provider and the follow-on contract for around 800 devices could be worth £4m.
Quality of earnigs improving
The repositioning of the group will not only improve the quality of earnings, but means that Pennant could reduce operating costs by around £0.5m in 2022 given the higher weighting of software in the mix. Bearing this in mind, WH Ireland’s expectations that pre-tax profit will rise from £0.1m to £0.6m on £1m higher revenue of £17m in 2022 looks far too conservative to me given the far greater proportion of high margin software sales next year, and a potentially lower cost base. Chairman John Ponsonby and Walker both highlight an “air of optimism in business activity, client discussions and contracts.” It is worth noting.
From my lens, Pennant has now turned the corner after a difficult couple of years, a point that is certainly not reflected in its market capitalisation of £11.5m. The IPS division alone is worth more than that as a standalone operation given the high multiples of sales being paid for SaaS businesses. Moreover, unrealised tax losses of £4.5m carried forward will benefit future taxable profits to accelerate the earnings recovery. The share price could easily double and more from this point if the contract momentum continues to build. Recovery buy. (Source: Investors Chronicle)
20 Sep 21. Oshkosh Corporation invests in Carnegie Foundry to build upon autonomy and robotic. Oshkosh Corporation (NYSE: OSK), a leading innovator of mission-critical vehicles and essential equipment, and Carnegie Foundry, a robotics and artificial intelligence (AI) venture studio headquartered in Pittsburgh, Pa., announced today a strategic partnership and Oshkosh Corporation investment in Carnegie Foundry to accelerate innovation in autonomy and robotics.
Carnegie Foundry has an existing relationship with the National Robotics Engineering Center (NREC) at Carnegie Mellon University, the world leader in autonomous robotics and artificial intelligence. The new partnership will build upon this relationship and will complement Oshkosh’s ongoing work in autonomous vehicles and equipment, providing significant benefits to the ms of people that do important work every day – including the nation’s soldiers, firefighters and first responders, as well as environmental service, refuse collection and construction workers.
“The Carnegie Foundry team is comprised of industry leaders with outstanding expertise in autonomy,” said John Pfeifer, Oshkosh Corporation President and Chief Executive Officer. “For years Oshkosh has been developing autonomous technology that delivers greater productivity while reducing total cost of ownership for our customers. Oshkosh’s strategic investment in Carnegie Foundry will put our customers at the forefront of emerging innovation and technology in the robotics and autonomy space.”
“We are very excited to partner with Oshkosh Corporation as we bring autonomy, robotics and AI innovations to market,” said Carnegie Foundry Co-Founder and Chief Executive Officer Dr. Robert J. Szczerba. “Industrial-scale innovations require specialized experience, a deep understanding of these unique markets and a long-term approach. It’s our good fortune that we found investment, aligned mindsets and large-scale industrial specialization with our partners at Oshkosh Corporation.”
As part of the strategic partnership, a member of Oshkosh Corporation will join the Carnegie Foundry Board of Directors.
About Oshkosh Corporation
At Oshkosh (NYSE: OSK), we make innovative, mission-critical equipment to help everyday heroes advance communities around the world. Headquartered in Wisconsin, Oshkosh Corporation employs more than 14,000 team members worldwide, all united behind a common cause: to make a difference in people’s lives. Oshkosh products can be found in more than 150 countries under the brands of JLG®, Pierce®, Oshkosh® Defense, McNeilus®, IMT®, Jerr-Dan®, Frontline™, Oshkosh® Airport Products, London™ and Pratt Miller. For more information, visit oshkoshcorp.com.
®, ™ All brand names referred to in this news release are trademarks of Oshkosh Corporation or its subsidiary companies.
About Carnegie Foundry
Carnegie Foundry is a unique Robotics and AI venture studio, headquartered in Pittsburgh, PA. In partnership with the world leader in autonomous robotics and AI – the National Robotics Engineering Center (NREC) at Carnegie Mellon University – we develop, mature and commercialize cutting-edge IP and advanced prototypes, already market tested and primed for new and expanded applications. Our business model mitigates the engineering risk, long lead times to market ready products and high burn rate that are the most common points of failure for other robotics companies. This allows Carnegie Foundry to build-out and spin-off multi-use technology solutions better, faster and cheaper. For more information visit carnegiefoundry.com or contact us at . (Source: BUSINESS WIRE)
20 Sep 21. Leading Impact Protection Company D3O Acquired by Elysian Capital III LP. D3O is recognized as the world’s foremost impact protection brand, partnering with a significant portfolio of global brands across the motorcycle, sports, defense, workwear and consumer electronics industries, with D3O products used by the likes of the US Department of Defense, Fox Racing, ZAGG and Triumph Motorcycles. D3O has a portfolio of branded patented technologies that are used across a range of applications: from helmet liner systems that mitigate against traumatic brain injury for soldiers and first responders; low profile CE certified body armour for motorcyclists; back of hand protection for industrial workers; through to protective cases and screen shields for smart phones.
With its distinct ‘orange’ colour, the D3O ‘ingredient brand’ is recognized as the authority on impact protection and the brand’s team of ambassadors include NHL star Seth Jones, Isle of Man TT world record holder Michael Dunlop; and eight-time gold medallist Downhill Racer Tahnée Seagrave. D3O’s appeal is far reaching with products and materials also used by Formula 1 teams, Hollywood stunt men and women, and a host of Olympic athletes during the Tokyo 2020 games.
Stuart Sawyer, CEO of D3O, said: “We are delighted to be working with Elysian for the next phase of growth for D3O. Our talented and hard-working team have done an exceptional job at establishing D3O as the market leader for impact protection. We look forward to building on this foundation through continued innovation, delivering best-in-class customer service and providing a compelling brand value proposition. I’d like to thank our previous investors for the support they have given us in establishing D3O, we now look forward to scaling the business and realising the significant opportunities to protect people and their things around the world.”
James Cunningham, Partner at Elysian Capital, said: “We have been very impressed with the way Stuart and the team have developed the D3O brand and the breadth and quality of the customers the company serves. We look forward to supporting them as they realise the potential for the brand across existing and new market segments.”
ABOUT D3O (www.D3O.com)
D3O is a fast-growth Protection company that develops and markets world leading impact protection products. With offices in the UK, US and China, D3O partners with a broad portfolio of world-class brands that include the US Department of Defense, ZAGG, Triumph Motorcycles and Fox Racing. From body protection for professional athletes and motorcyclists to helmet liner systems that mitigate against traumatic brain injury, D3O is recognised as the authority on Impact Protection.
ABOUT ELYSIAN CAPITAL LLP (www.elysiancapital.com)
Elysian Capital is an independent private equity fund specialising in the UK and Ireland lower mid-market. The management team combines entrepreneurial and business operational competence with an experienced private equity and leveraged debt capability, providing the full range of skills needed to make and develop successful investments in Elysian Capital’s target markets. (Source: PR Newswire)
20 Sep 21. BigBear.ai Announces First Half 2021 Financial Results Including Over $150m in New Contract Awards and Strategic Partnership with Virgin Orbit.
- Revenue of approximately $72m for the six months ended June 30, 2021
- Over $150m in new contract awards since the end of the second quarter
- Analytics segment adjusted gross margin of 48%
- Ramping of investments/workforce to execute on growth strategy; 75+ hires year-to-date across R&D, sales and marketing and product/service delivery
- Entered into multiple commercial strategic agreements, including a multi-year transformational commercial partnership with Virgin Orbit
- Business Combination with GigCapital4 on track to close in fourth quarter 2021
BigBear.ai, a leading provider of artificial intelligence (“AI”), machine learning, cloud-based big data analytics, and cyber engineering solutions, today announced financial results for the six months ended June 30, 2021.
“BigBear.ai’s steady pace of contract awards and expanded customer engagements drove our strong year-to-date revenue and backlog growth. This is a testament to our successful track record for growing customer relationships by seamlessly implementing flexible solutions that enable customers to make critical decisions faster, more accurately and with better outcomes,” said Dr. Reggie Brothers, BigBear.ai Chief Executive Officer. “Our investments for commercial penetration and public company readiness have proceeded according to plan. I am also very pleased to report that we recently signed two major contract awards that add more than $150m to our backlog as well as a new transformational commercial agreement that will generate annual recurring revenue of $6m over four years. Though timing of these key contract awards differed slightly from our expectations due to COVID-related delays and pushed a portion of our revenue growth later in the year than anticipated, this revenue is now on board. This timing difference between our investments and revenue will largely be settled in the second half of 2021, when our adjusted EBITDA will reflect the true performance of the company.”
Dr. Brothers continued, “We are looking forward to completing our business combination with GigCapital4 later this year and for BigBear.ai to emerge as a public company. This will further accelerate our growth as we invest to develop new technology and expand into commercial markets, where we see substantial opportunities for our AI-powered solutions, which enable companies to make better decisions based on the massive amount of data they are rapidly accumulating.”
Second Quarter Financial Highlights
- Year-to-date revenue of approximately $72m
- Year-to-date gross margin of 27%, incrementally lower than expected due to higher, non-recurring subcontractor costs to capture immediate growth opportunities
- Year-to-date segment adjusted gross margin of 48% for the Analytics segment and 22% for the Cyber & Engineering segment
- Year-to-date net loss of $5.6m reflecting a timing difference between the company’s planned investments through the period and delay in revenue/contract awards as a result of COVID
- Year-to-date non-GAAP adjusted EBITDA* of approximately $3.3m
Recent Customer Wins and Awards
- Since June 30, added more than $150m of new contract awards, which, combined with BigBear.ai’s backlog as of June 30, 2021, totals approximately $485m. Key awards include the following:
o Entered into a transformational multi-year commercial partnership with Virgin Orbit for the real-time deployment of AI-powered software for mobile assets in the field; the development of applications that can identify objects, analyze ground material, map land and monitor climate in space; and the use of innovative products that fuse data from multiple intelligence data
o Awarded a five-year, single-award contract, valued at $141m, to provide business analytics to a key customer in the intelligence community
o Received a Notice of Intent for a two-year contract award from the Air Force Research Laboratory in support of Project AURORA, in which BigBear.ai will deploy its Observe, Orient and Dominate products to accelerate and enhance the joint planning decision-making cycle
o Executed a MOU with UAV Factory to develop AI and machine learning capabilities for unmanned systems and components used in the commercial and defense markets
Financial Outlook
BigBear.ai is revising its previously announced projections for fiscal year 2021 due to COVID-related delays in the timing of select government contract awards. Three contracts, with a combined value of approximately $150m, were awarded as much as six months later than initially projected, which moved the entire expected period of performance for those contracts correspondingly. The company reiterates its previously announced financial projections for fiscal year 2022, due to the visibility in already awarded contracts.
The company is projecting:
- Revenue between $88m and $113m in the second half of 2021, bringing full-year projected revenue between $160m and $185m
- Adjusted EBITDA* between $9.2m and $10.2m in the second half of 2021, bringing full-year projected adjusted EBITDA* between $12.5m and $13.5m after accelerated sales and marketing and R&D costs to drive growth strategy
Business Combination with GigCapital4
As previously announced, BigBear.ai and GigCapital4, Inc. (“GigCapital4”; Nasdaq: GIGGU, GIG, GIGGW) a private-to-public equity (PPE)™ entity also known as special purpose acquisition company (“SPAC”) have entered into a definitive merger agreement that will result in BigBear.ai becoming a publicly traded company. The transaction is expected to close in the fourth quarter of 2021, subject to, among other things, the approval by GigCapital4 stockholders, regulatory approvals, and the satisfaction or waiver of other customary closing conditions.
Summary of Results for the Six Months Ended June 30, 2021
EBITDA and Adjusted EBITDA for the Six Months Ended June 30, 2021
About BigBear.ai
A leader in decision dominance for more than 20 years, BigBear.ai operationalizes artificial intelligence and machine learning at scale through its end-to-end data analytics platform. The company uses its proprietary AI/ML technology to support its customers’ decision-making processes and deliver practical solutions that work in complex, realistic and imperfect data environments. BigBear.ai’s composable AI-powered platform solutions work together as often as they stand alone: Observe (data ingestion and conflation), Orient (composable machine learning at scale), and Dominate (visual anticipatory intelligence and optimization).
BigBear.ai’s customers, which include the U.S. Intelligence Community, Department of Defense, the U.S. Federal Government, as well as customers in the commercial sector, rely on BigBear.ai’s high value software products and technology to analyze information, identify and manage risk, and support mission critical decision making. Headquartered in Columbia, Maryland, BigBear.ai has additional locations in Virginia, Massachusetts, Michigan, and California. (Source: BUSINESS WIRE)
20 Sep 21. Materion to Acquire H.C. Starck’s Electronic Materials Portfolio, Creating a Global Leader in Premium Thin Film Materials for the Semiconductor Market.
- Acquiring industry-leading, premium electronic materials portfolio, significantly increasing access to the high-growth semiconductor market
- Meaningfully increases scale and total addressable market in the semiconductor space, while providing greater product and geographic diversification and new, above-market growth opportunities
- Accelerates transformation strategy to become a preeminent provider of advanced material solutions to high-tech markets with greater alignment to global megatrends
- Offers compelling growth and free cash flow characteristics; expected to be immediately accretive to EBITDA margin and adjusted EPS
Materion Corporation (NYSE: MTRN), a world leader in high performing advanced materials, today announced that it has entered into an agreement to acquire H.C. Starck Solutions’ industry-leading, electronic materials business, located in Newton, Massachusetts (HCS-Electronic Materials). HCS-Electronic Materials utilizes proprietary technology and extensive material science know-how to deliver tantalum- and niobium-based premium products and services for the semiconductor, industrial, and aerospace & defense markets.
HCS-Electronic Materials is a leading provider of high-quality, high-purity tantalum sputtering targets, important in the manufacture of today’s leading-edge semiconductor chips. Building on Materion’s existing portfolio of electronic materials and premium thin film target solutions, the acquisition will significantly enhance the company’s position as a leading supplier to the high-growth semiconductor industry. HCS-Electronic Materials adds advanced manufacturing processes and technical capabilities necessary to meet the rapidly evolving technology challenges involved in delivering today’s most advanced chip architectures and important applications for the industrial and aerospace & defense markets.
HCS-Electronic Materials is expected to generate revenue of approximately $145m in 2021, adding over 19% in Value-Added Sales, and adjusted EBITDA of approximately $29m, representing an adjusted EBITDA margin of approximately 20%. The addition is expected to be immediately accretive to Materion’s adjusted EBITDA margin by 100 basis points. The purchase price of $380m reflects an approximate 13x estimated 2021 adjusted EBITDA multiple before synergies, and an approximate 10x estimated adjusted EBITDA multiple including projected run-rate synergies. Following closing of the transaction, HCS-Electronic Materials will be part of Materion’s Advanced Materials segment.
“HCS-Electronic Materials is a highly strategic and transformative acquisition that builds on our strong position in the semiconductor industry and supports our goals of driving above market growth, expanding margins, and delivering consistent double-digit EPS growth,” Materion President & CEO Jugal Vijayvargiya said. “HCS-Electronic Materials’ leading-edge technology extends our global reach and expands our product offering to leading semiconductor chip manufacturers, as well as important industrial and aerospace & defense customers. We are excited about the opportunities ahead and look forward to welcoming HCS-Electronic Materials’ 140 highly-skilled team members to Materion.”
The combination presents significant compelling strategic and financial benefits:
- Increases Access to High-Growth Semiconductor Market and Alignment with Megatrends: Deepens alignment with leading global semiconductor manufacturers and further enhances our position to benefit from key megatrends, specifically proliferation of smart devices, high-speed connectivity (5G), autonomous driving, artificial intelligence, and cloud computing
- Creates Significant End Market Scale and Increases Total Addressable Market: Expands Materion’s presence in the semiconductor industry, increasing sales contribution by more than 40%, provides access to new higher-value chip applications, and meaningfully increases the total addressable market opportunity in the space
- Broadens Portfolio and Expands Reach: Adds new advanced materials to the portfolio, increases sales contribution outside the U.S., creates geographic advantage aligned with evolving semiconductor manufacturing trends, and strengthens established positions in industrial and aerospace & defense markets
- Adds Proprietary Process Technology and Key Talent: Adds a center of excellence with proprietary process technologies that yield highly differentiated solutions and brings deep technical expertise and seasoned talent
- Enhances Financial Profile: The transaction is expected to be immediately accretive to Materion’s adjusted EPS and adjusted EBITDA margins by 100 basis points, and is expected to increase annual value-added sales by over 19%; in addition, the company expects synergies to meaningfully contribute to EBITDA; targeting approximately $10M by 2026
“The addition of HCS-Electronic Materials significantly enhances Materion’s portfolio of advanced materials solutions and is a great example of how we are leveraging our strong financial position to acquire proven businesses that align with our growth strategy. We remain focused on deepening and broadening our technical capabilities, adding greater diversification, and increasing our access to attractive higher-growth and higher-margin business opportunities,” Vijayvargiya said.
The acquisition of HCS-Electronic Materials builds on Materion’s acquisition of Optics Balzers in 2020, which expanded the company’s global position in optical thin film coatings, furthering its transformation to a leading advanced materials supplier.
Transaction Terms and Financing
The acquisition of HCS-Electronic Materials is structured as an equity purchase.
Materion expects to finance the transaction utilizing a new term loan along with borrowings from its revolving credit agreement. Pro forma net debt to adjusted EBITDA is expected to be approximately 2.9x at the time of close, within the company’s stated target leverage range of 1.5x to 3.0x. Materion expects to generate strong cash flow and deploy it towards deleveraging to the middle of the range within 24 months post close.
The transaction is expected to close in the fourth quarter of 2021, subject to customary closing conditions, including regulatory approval.
J.P. Morgan is serving as exclusive financial advisor and Jones Day as legal counsel to Materion.
About Materion
Materion Corporation is headquartered in Mayfield Heights, Ohio. Materion, through its wholly owned subsidiaries, supplies highly engineered advanced enabling materials to global markets. Products include precious and non-precious specialty metals, inorganic chemicals and powders, specialty coatings, specialty engineered beryllium alloys, beryllium and beryllium composites, and engineered clad and plated metal systems.
About H.C. Starck Solutions
Privately held H.C. Starck Solutions is a leading global supplier of refractory metal powders and, with core competencies in tantalum and niobium, supplies growing industries such as semiconductor, industrial, and aerospace & defense. The company, owned by Advent International and The Carlyle Group, operates six production sites across North America, Europe, and China and employs over 470 people. (Source: BUSINESS WIRE)
20 Sep 21. Australian cyber security company archTIS has acquired the European operations of Cipherpoint’s software division, the company confirmed. The recent acquisition is expected to enhance archTIS’s core offering by expanding on the number of data centric and zero trust platforms offered by the company. The expanded offering expects to support Microsoft customer environments whether on the cloud or on premises.
According to a release from the company, the recent acquisition includes the intellectual property to cp.Protect and cp.Discover, that provide SharePoint on-premises data encryption and data discovery, respectively.
The acquisition is expected to enhance and diversify the company’s ongoing international revenue stream.
“The acquisition clearly demonstrates our fiscal responsibility and our ability to consistently execute on what we have communicated to shareholders and the market around targeting acquisitive growth,” archTIS chief executive Daniel Lai said.
The current customer base of the cp.Protect and cp.Discover offerings include DHL, Bank of Finland, California State University, Arthur J Gallagher, the US Defense Advanced Research Projects Agency (DARPA), Singapore Power, Singapore Tote and Acronym Media.
NTT Data, the authorised reseller of Cipherpoint technologies, will continue to sell the products in Germany, Austria, Switzerland and Singapore.
Kurt Mueffelmann, archTIS global chief executive and president of the US region, welcomed the announcement.
“We have worked with the Cipherpoint software team for some time through our existing mutual reseller arrangements. The asset purchase is a logical next step in the relationship,” Mueffelmann said.
“The bolt-on acquisition represents excellent value for archTIS shareholders (~3.8x current annual recurring revenue) with the delivery of many long-serving, high profile customers and partners, as well as extending markets in Europe and Singapore.
“In particular, the asset purchases will provide archTIS with unique data discovery and classification technology that are complementary to NC Protect and can be cross-utilised with our existing technology stack. Moreover, the industry-ready Cipherpoint staff will slot readily into our active EU/America offices and bolster our sales efforts in these markets.”
According to a statement from the company, “The purchase price consists of $1.4m in cash with $200,000 of the initial purchase price held in escrow until the novation of certain contracts. In addition, further consideration of up to $1m is to be paid based on total contract values of contracts assigned to archTIS as of 31 March 2022.” (Source: https://www.cybersecurityconnect.com.au/)
20 Sep 21. Investors like nothing better than a company-transforming earnings-enhancing acquisition. Cybersecurity software provider Kape Technologies (KAPE: 415p) has delivered exactly that, agreeing to pay $936m (£683m) for ExpressVPN, a leading provider in the digital privacy space with more than 3m active users across 180 countries.
Over 40 per cent of ExpressVPN’s users are based in North America, which scales up Kape’s global offering, and almost half its 290 employees are R&D engineers, thus adding valuable expertise. There are also material opportunities to cross-sell and generate cost savings by combining the two groups which will service 6m paying customers. ExpressVPN is fast-growing, reporting revenue of $279m and cash profit of $74.8m in 2020, both metrics up by more than a third year on year.
Kape is now forecast to deliver cash profit of around $172m in 2022, up from $74m expected in 2021 and $38m in 2020. When I included the shares, at 47.9p, in my 2017 Bargain Shares portfolio, Kape was making cash profit of $8m. Given the structure of the deal, analysts expect earnings per share (EPS) of 41c (30p) in 2022, implying 61 per cent year-on-year growth. On a forward price/earnings (PE) ratio of 13.8, the rerating has further to run.
Kape’s earnings-accretive game-changing acquisition
- Earnings-accretive $936m acquisition of ExpressVPN
- Cost savings of $19m targeted in 2022 and $30m annualised from 2023
- Guidance cash profit of $166m to $172m in 2022 on revenue of $610m to $624m
- Forecast earnings per share (EPS) of 41¢ in 2022
The $936m Kape Technologies (KAPE: 415p) is paying for ExpressVPN looks a fair price as it represents 10.8 times 2022 cash profits (7.8 times after targeted cost savings and synergies), a deep discount to rival Avast’s recent take-out price of 16 times cash profit.
The funding structure is sensible, too, as the consideration is being settled by the issue of $237m new ordinary Kape shares to the vendors, $354m cash on completion (financed by a placing and retail offer at 337.5p), with a further $172m cash payable on both the first and second anniversaries of the deal. Importantly, deferred consideration can be fully funded from Kape’s operational cash flow and by using undrawn lines from its existing credit lines. Net debt is expected to decline from three times cash profit on completion to 1.5 times by the end of 2022.
Latest from Alpha
Factoring in $19m of targeted cost savings in 2022, the £1.2bn market capitalisation group is being valued on an enterprise valuation to cash profit multiple of 11 times. That’s a low rating for a group run by a shrewd management team who are proving adept at increasing its customer base, cross-selling products, successfully integrating acquisitions and entering new lucrative revenue generating agreements.
Kape’s share price has risen by 35 per cent since I last suggested buying the shares, at 303p (‘Bargain shares: Building momentum’, 26 July 2021), and the holding has produced a 763 per cent total return on my 2017 entry point. I raise my fair valuation by a third to 500p to reflect a target enterprise valuation of 13.4 times 2022 cash profit estimates. Buy. (Source: Investors Chronicle)
20 Sep 21. Airbus joins DAX stock exchange index in Germany. Airbus SE (stock exchange symbol: AIR) has become a member of the new DAX40 index in Germany, effective today. On 3 September 2021, Deutsche Börse completed the expansion of the DAX from 30 to 40 companies as part of a comprehensive reform process and appointed Airbus, among others, to the German premium index.
“We are very pleased to be appointed to the newly formed DAX. We believe that Airbus has found its place in this index due to its economic size and performance. This inclusion allows us to better represent Airbus’ historic industrial significance in Germany and highlight our innovative and diverse portfolio of activities too,” said Guillaume Faury, Airbus Chief Executive Officer. “The inclusion in Germany’s most important stock market index is both a motivation and a responsibility to continue our strong strategic presence in the country. We are proud of our European roots.”
With this inclusion in the DAX40, Airbus will no longer be a member of the MDAX, to which it has belonged since the listed European aerospace group was founded in 2000.Airbus shares are traded at three European stock exchanges: in Paris, where Airbus has been a fixed component of the premium CAC40 index since 2000; in Frankfurt and in Spain (Madrid, Barcelona, Bilbao and Valencia).
12 Sep 21. Apax Partners’ Sale of a Majority Shareholding in Marlink to Providence Equity Partners. Apax Partners SAS (“Apax”), a leading European private equity firm based in Paris is working with Providence Equity Partners (“Providence”), a premier private equity firm that specializes in the media, communications, education, software and services industries, to acquire a majority shareholding in Marlink from Apax. The transaction results in an enterprise value for Marlink Group of approximately $1.4bn; further details were not disclosed.
Apax maintains a deep conviction in the Company’s growth prospects, will retain a significant minority shareholding. Marlink’s management team and world leading investment house Ardian have also committed to minority interests.
Headquartered in Paris and Oslo, Marlink is a world leading Satellite Service Operator (“SSO”) offering business-critical intelligent hybrid networks and digital solutions to empower the remote operations of a wide range of maritime, enterprise, energy, humanitarian and government customers around the world.
“Marlink offers a comprehensive set of smart network solutions combining the entire spectrum of satcom and terrestrial connectivity, IT, Cloud, cyber security and IoT managed services.” said Karim Tabet, Senior Managing Director at Providence. “We are pleased to be partnering with such an outstanding business, and, together with Apax and Ardian, we look forward to supporting Erik Ceuppens and his team as Marlink continues to be a market leader and seeks to capitalize on increased demand for higher bandwidth connectivity and digital solutions.”
Michaël Vervisch, Managing Director at Providence, added, “We have been impressed by the Company’s transformation into a branded broadband provider leveraging its own hybrid network and capturing scale benefits by taking a leadership role in the industry. Furthermore, we see significant future growth opportunities, including through offering value added digital solutions.”
Bertrand Pivin, Partner at Apax Partners, said, “Apax Partners first invested in Marlink 15 years ago. Under the leadership of Erik Ceuppens, the company transformed its business model, tripled its revenues and multiplied its EBITDA by 10. It emerged as the worldwide leading Satellite Service Operator, first in the maritime sector, and now, with the recent acquisition of ITC Global, in the enterprise sector. The 10,000-strong remote broadband terminals installed worldwide will serve as a springboard to design and deliver the much-needed digital services which Marlink’s direct customers are seeking for their business-critical operations. We believe Providence is the partner of choice to conduct the next stage of this extraordinary journey. Apax is keen to roll-over part of its investment and hold a significant fraction of the share capital, in order to continue to back this remarkable company.”
Erik Ceuppens, CEO of Marlink, said: “This important shareholder transaction is a reflection of their belief in our company’s strength and future growth potential. Marlink has become a leader in B2B satcom solutions through significant organic growth and a series of well-targeted strategic acquisitions. With our Smart Network strategy, Marlink is fully focused on supporting the rapid digitization of our customers’ remote operations and on making them more sustainable. We are delighted to partner with premier private equity investors Providence and Ardian as our new majority shareholders and to benefit from the continued support of Apax, our investor-of-the-first-hour. With our solid investor backing, management team and employees, we form a powerful force to take Marlink Group to the next level.”
Alexandre Motte, Head of Ardian Co-Investment concluded, “We have been impressed by Marlink’s unique position in the B2B satcom industry and the accomplishments of Erik Ceuppens and his team. We are thrilled to participate in this new chapter of Marlink’s development, supported by increasing connectivity and service needs as well as further growth opportunities, notably through acquisitions. We thank Marlink, Providence and Apax for their trust and look forward to supporting this partnership.” The transaction is expected to close in the first half of 2022, subject to customary and regulatory approvals. (Source: Satnews)
14 Sep 21. Spire Global Enters Definitive Agreement To Acquire exactEarth. Spire Global, Inc. (NYSE: SPIR) and exactEarth Ltd. (TSX: XCT) (“exactEarth”) have entered into a definitive arrangement agreement under which Spire will acquire exactEarth for approximately $161.2m (CAD$204.2 m) in cash and stock, which implies ~9.1x exactEarth’s Enterprise Value to LTM revenue.
Once completed, exactEarth will become a fully owned subsidiary of Spire and continue to operate from Cambridge, Ontario, Canada, under the leadership of exactEarth’s CEO Peter Mabson, reporting directly to Spire CEO Peter Platzer.
The combined company aims to be transformative for customers and the maritime industry. Bringing together real-time and historical space-based maritime data, Spire and exactEarth will provide customers with innovative solutions that drive the digitization of the almost $2 trillion global maritime industry, such as better fleet visibility for more efficient routing, cost savings from reduced fuel consumption, and a lower environmental footprint.
Strategic Rationale…
- Increase Spire’s customer based by more than 75% —In the maritime S-AIS (Satellite-Automatic Identification System) industry, exactEarth will accelerate Spire’s expansion by adding more than 150 customers. These customers in the commercial and government sectors will provide substantial cross-selling opportunities of Spire’s data and analytics products.
- Minority indirect ownership stake in IoT provider Myriota, a fast growing player in the low-cost, low-power, secure direct-to-orbit satellite connectivity for IoT. This affords Spire a solid first foothold in this high-growth industry of space-based IoT solutions. exactEarth will retain its board seat.
- Strong addition to ARR — With approximately 90% of exactEarth’s $18.2m LTM revenue under subscription contracts, and a Net Retention Rate of approximately 130%, exactEarth will accelerate Spire’s growth in annual recurring revenue (ARR).
- Expands Historical Database to accelerate AI/ML driven product development — exactEarth’s 10-year archive of AIS data will substantially increase Spire’s historical maritime (AIS) data set, accelerating Spire’s new product offerings and solutions.
- Adds depth of experience to maritime and product development teams — With an average tenure of more than 7 years, exactEarth’s experienced sales and product development team will enhance Spire’s global market capability and reach in the maritime industry.
- Expands Spire’s geographic footprint — exactEarth sells to 39 countries around the world.
Details on the Proposed Transaction
The total transaction consideration of CAD$204.2m ($161.2m) is comprised of approximately CAD$130.9m ($103.4m) in cash and CAD$73.2m ($57.8m) in Spire’s Class A Common Stock.
The transaction will be carried out through a plan of arrangement under the Canada Business Corporations Act. Under the plan of arrangement, holders of exactEarth common shares will receive CAD$2.5009 (US$1.9751) in cash and 0.1 share of Spire Class A Common Stock for each exactEarth common share held. Based on the 10-day volume weighted average price of Spire’s Class A Common Stock on the New York Stock Exchange of US$11.0223 (CAD$13.9564) on Monday September 13, 2021, this represents total per share consideration of CAD$3.90 (US$3.08) per common share for exactEarth shareholders. On completion of the arrangement, the former shareholders of exactEarth will hold approximately 3.8% of Spire, based on currently outstanding share capital.
The transaction is expected to be accretive on both a revenue basis and an adjusted EBITDA basis. The transaction has been approved by the boards of directors of both companies and exactEarth’s board of directors recommends that exactEarth shareholders vote in favor of the transaction.
The completion of the transaction is subject to approval by at least two-thirds of the votes cast at a special meeting of exactEarth shareholders which is expected to take place in November 2021. The transaction is also subject to applicable regulatory approvals and the satisfaction of certain closing conditions customary in transactions of this nature. The transaction is not subject to any financing condition.
The directors, officers and certain shareholders of exactEarth, collectively holding approximately 60% of its outstanding common shares, have entered into voting support agreements under which they have agreed to support and vote in favor of the transaction.
This acquisition is expected to close in calendar 4Q21 or in calendar 1Q22.
“Peter and I share a vision about the opportunity for space-based maritime data and the digitization of the global maritime industry, and I look forward to pursuing that vision together,” said Peter Platzer, Spire’s CEO. “I have great respect for the highly experienced team at exactEarth and am excited to continue driving this digital transformation together, serving more customers with a more robust data and solutions platform. We look forward to joining forces with the Spire team to not only have an impact on the maritime industry, but also to have an impact on the planet, through offering customers enhanced data solutions that are designed to impact not only a company’s bottom line, but also its environmental footprint.“ (Source: Satnews)
————————————————————————-
TCI International, Inc., is a wholly-owned subsidiary of SPX Corporation. TCI provides turn-key solutions for spectrum management and monitoring, direction finding, geolocation and communications intelligence to civilian, government, military and intelligence agencies as well as antennas for communications and high-power radio broadcasting. TCI is headquartered in Fremont, California, USA. For more information, visit www.tcibr.com.
————————————————————————-