Kratos Defense & Security Solutions has signed a definitive agreement to sell the US and UK operations of its Electronic Products Division to Ultra Electronics for US$265m in cash.
The business comprises electronic systems, subsystems and components for…
Kratos Defense & Security Solutions has signed a definitive agreement to sell the US and UK operations of its Electronic Products Division to Ultra Electronics for US$265m in cash.
The business comprises electronic systems, subsystems and components for electronic warfare, radar, intelligence surveillance and reconnaissance programmes.
Post-transaction Kratos’ Microwave and Electronic Products business will include its manufacturing facilities in Israel, which provide solid state power amplifiers, integrated microwave assemblies and beamforming modules as well as its satellite communications and electronic subsystems operations.
The EPD division reported EBITDA of US$22m in 2014, implying a valuation multiple of around 10.7 times LTM EBITDA. The acquisition will be financed through Ultra’s existing facilities and a new four-year term loan provided by four banks from Ultra’s existing core banking group.
Kratos plans to use proceeds from the sale, which is expected to close in Q3 2015, to repay up to US$200m of its 7% senior secured notes as well as the US$41m outstanding on the company’s US$110m bank credit facility.
The sale is a furtherance of Kratos’ strategic realignment plan that was first announced in 2013. Eric DeMarco, Kratos’ president and CEO said, “The divestiture of these operations to Ultra is the culmination and conclusion of a detailed and thorough strategic alternatives review performed by Kratos’ board of directors. Through this process our strategy of building a technology and products based business that supports strategic National Security programs has been both verified and demonstrated through the strong interest we received for several Kratos businesses.
“This transaction is financially accretive, deleveraging and positions Kratos to continue to execute our long term strategy. Post-transaction, Kratos remains a leader in unmanned systems, satellite communications, signal monitoring, cyber security and microwave technology.
“We are focused on introducing our new satellite communication, signal monitoring and related cyber products to the market over the next 24 months. We expect these programs and initiatives to generate strong revenue, profit and cash flow growth beginning in 2017-2018. Kratos’ strategic alternatives review is now complete.”
SunTrust Robinson Humphrey served as financial adviser to Kratos and DLA Piper its legal counsel. In addition, Bryant Riley, founder, chairman and CEO of B. Riley & Company has been providing Kratos with strategic planning and advice.