Mobile satellite operator Orbcomm has signed a definitive agreement with Alanco to acquire the assets of its flagship StarTrak Systems subsidiary for approximately US$18.5m.
Alanco, a US-based wireless monitoring and asset management solutions…
Mobile satellite operator Orbcomm has signed a definitive agreement with Alanco to acquire the assets of its flagship StarTrak Systems subsidiary for approximately US$18.5m.
Alanco, a US-based wireless monitoring and asset management solutions specialist, stated that the deal would facilitate a capital restructuring of the business, eliminating its debt and retiring a significant amount of preferred and common stock.
Under the terms of the transaction, Orbcomm will pay Alanco approximately US$1.7m in cash, cancel all obligations under its US$300,000 secured loan agreement, return to Alanco 500,000 shares of series E convertible preferred stock with a face value of US$2.25m that it held, and issue Alanco with up to 1.987 million shares of Orbcomm common stock and 183,550 shares of Series A perpetual convertible preferred stock.
In addition, Orbcomm is to cancel the US$3.9m loan agreement between Alanco and its shareholders the Anderson Family Trust. Via its buy-out vehicle STK Acquisition, Orbcomm will subsequently issue a US$3.9m four-year 6% secured promissory note to the Anderson trust. Orbcomm will also purchase all of the shares of Alanco held by the Anderson trust and certain of its affiliates in return for an aggregate of 413,184 Orbcomm shares. The M2M specialist has a similar agreement in place with Timothy Slifkin and Thomas Robinson whereby it will purchase all of their Alanco shares in return for approximately 218,877 shares of Orbcomm stock.
The purchase agreement also includes an earn-out component of up to US$1.2m based on StarTrak’s 2011 performance.
Commenting on the acquisition, Robert Kauffman, Alanco chairman and CEO said: “This Orbcomm sale provides our shareholders a very favorable, risk-adjusted valuation for our StarTrak business, as well as resulting in Alanco receiving a significant shareholding in Orbcomm, which we believe will be an excellent long term investment.
“A combined Orbcomm/StarTrak, through operating scale and reduced SG&A expenses, should boost StarTrak profitability, providing a significant contribution to Orbcomm’s future earnings and share value.
“The Orbcomm transaction will also facilitate a capital restructuring of Alanco resulting in elimination of all interestbearing debt, retirement of both our Series D and E Preferred Stock, and retirement of approximately 1.2 million common shares, reducing the total outstanding common stock to about 4.4 million shares. The resulting post-transaction Alanco will feature a relatively ‘clean’ balance sheet with US$7-8m of current assets consisting of cash and Orbcomm stock.
“We are now actively pursuing new opportunities to create shareholder value by leveraging Alanco’s public listing, attractive balance sheet, and potentially valuable tax-loss carry forwards through a strategic merger or acquisition.” For its part, the acquisition of StarTrak, which provides asset tracking, monitoring and control services to the refrigerated transportation marketplace, further bolsters Orbcomm’s M2M services portfolio as it prepares to launch its second generation MEO constellation.
When Orbcomm first invested in Alanco in mid-2010, the two companies also entered into a product/software development cooperation agreement to develop new products based on the StarTrak technology and utilising the next generation system.
SpaceX is due to launch the new Orbcomm birds between 2011 and 2014.
Oberon Securities advised Alanco on the transaction.
