British satellite communications equipment maker Global Invacom is to acquire its US peer Skyware Global for up to US$11.6m in a deal that would make it the world’s largest satcoms equipment manufacturer.
Under the terms of the transaction, Global…
British satellite communications equipment maker Global Invacom is to acquire its US peer Skyware Global for up to US$11.6m in a deal that would make it the world’s largest satcoms equipment manufacturer.
Under the terms of the transaction, Global Invacom will issue Skyware’s shareholders with 27.96 million treasury shares, worth around US$6.6m and representing 9.9% of the enlarged company. It has also agreed to an earnout of up to US$5m in cash depending on how much revenue in excess of US$52.3m that Skyware earns over the next year.
The acquisition is subject to approval by Global Invacom’s shareholders on both the London AIM exchange and the Singapore stock exchange with an extraordinary general meeting scheduled to take place shortly.
The major rationale behind the deal is to give Global Invacom a geographic presence in the United States as well as bolster its product portfolio with Skyware Global’s VSAT and direct-to-home equipment.
The acquisition is also an opportunistic one for Global Invacom. A new senior management team at Skyware Global has been recruited in the last two years and sought to shift the company’s strategy from one focused on rapid top line sales growth at the expense of its bottom line to one aimed at the maintenance and growth of sustainable business relationships with key broadcasters. In practice, this has meant focusing on selling higher end high precision Ka-band dishes (VSAT or data over satellite dishes) to market leading vendors.
The result is that while revenues have dropped from US$79m to US$52m between year-end 2012 and 2014, gross margin has risen from 16% to 24%. Global Invacom believes that though Skyware Global is still loss-making, its new business approach and improvements in its bottom line mean that the synergies, cross selling and other efficiencies resulting from the merger will enable the company to break even in a reasonably short timescale and quickly turn a profit thereafter.
Commenting on the acquisition, Tony Taylor, executive chairman of Global Invacom, said: “This is a very exciting addition to the group which enhances our position as a leader in the global satcoms market. The acquisition not only strengthens our presence in the US, but also complements our existing international footprint by bringing a new suite of products and expertise to address the global demand for internet connectivity.
“The transaction demonstrates our commitment to grow the business through strategic acquisitions.”
Global Invacom’s last acquisition took place in November 2014 when it paid US$3.5m for OnePath Networks (also known as Foxcom), an Israeli firm which provides RF over fibre products to satellite operators.
That deal came shortly after Global Invacom had raised £8.8m (US$15m) through listing on UK junior stock market AIM. At the time, the group said it would use the proceeds for M&A opportunities to expand across the European and North American satcoms markets.
FinnCap acted as Global Invacom’s nominated adviser and joint broker for the deal with Mirabaud Securities LLP as joint broker.
