Israel-based Gilat Satellite Networks is foraying deeper into the US defence sector after announcing it would buy US satellite power-amplifier maker Wavestream for approximately US$130m. The transaction also includes an earn-out provision over the next…
Israel-based Gilat Satellite Networks is foraying deeper into the US defence sector after announcing it would buy US satellite power-amplifier maker Wavestream for approximately US$130m. The transaction also includes an earn-out provision over the next year of up to US$7m.
Wavestream products have featured as components in several programs for the US Department of Defense, and the company recently announced the receipt of a US$19m order from General Dynamics SATCOM Technologies to support US army satellite communications systems.
“This acquisition is a major move for Gilat. It is the confirmation of the company’s expansion strategy in the defence sector,” Joshua Levinberg, a co-founder of Gilat, told SatelliteFinance. “We will continue looking at other potential deals in the sector but not necessarily of that size,” he added.
The deal, to be closed before the end of the year, will be exclusively financed with cash, with the company saying it has about US$150m in cash-on-hand. However, Gilat also stated it would “raise a limited amount of financing either before or after closing to replenish its cash reserves.” The company is understood to be seeking to raise between US$50m and US$60m in debt and will borrow it against the company’s headquarters in Israel.
Privately-held Wavestream is expected to report about US$70m in revenue for 2010 with an EBIDTA margin of between 15 and 20 percent, meaning that the company was acquired for approximately 9x to10x EBITDA. Jefferies acted as financial adviser on the buy-side while Sagent Advisors provided financial advice to Wavestream.
Reports in Israel recently alleged that Gilat has been negotiating a merger with Israeli telecom equipment company ECI. However, following the announcement of the acquisition of Wavestream and the use of much of Gilat’s cash-on-hand to pay for it, one SatelliteFinance source suggested that it would be highly unlikely that any merger with ECI would go ahead. The deal was reportedly expected to be made through a share swap reflecting a value of US$900m to US$1bn for the merged entity.
In the meantime, Gilat has started receiving financial compensation with regard to its LBO dispute. A few months ago, the company finally settled its spat with the private equity consortium that launched a failed bid to buy the company in early 2008. Under the settlement agreement, four private equity funds, Mivtach Shamir Holdings, LR Group, Gores Capital Partners II and DGB Investments, will pay Gilat an aggregate of approximately US$20m in return for the Israeli satellite operator terminating all court proceedings against them. Over half the US$20m was expected to be paid by 1 October 2010 with the remainder to be paid in annual installments ending in October 2013.
