Less than three months after the termination of its merger agreement with communications products developer Comtech, satcoms RF antenna developer CPI International is to be acquired by private equity firm Veritas Capital in a deal worth approximately…
Less than three months after the termination of its merger agreement with communications products developer Comtech, satcoms RF antenna developer CPI International is to be acquired by private equity firm Veritas Capital in a deal worth approximately US$525m.
Via its acquisition vehicle Catalyst Holdings, Veritas will pay CPI shareholders US$19.50 per share in cash, a premium of around 38% over the average closing price of CPI common stock for the 90 days day prior to the transaction’s announcement.
The transaction remains subject to CPI stockholder approval with a vote scheduled for early 2011. At present shareholders representing 49.9% of CPI’s share capital have agreed to vote in favour of the merger. Subject to this vote and to the customary closing conditions, the transaction is expected to be completed by April 15, 2011. The acquisition is, however, not subject to any financing conditions, with Veritas funding the deal entirely from its fourth fund rather than with a portion of new debt.
Joe Caldarelli, chief executive officer of CPI, commented: “With its extensive technology and defense industry experience and strong track record of fostering growth in its portfolio companies, Veritas Capital is an excellent partner for CPI. Our board of directors and management believe this transaction will provide considerable benefits for CPI’s customers, and CPI’s stockholders will benefit from a significant premium over the current stock price.”
Indeed, the offer price is notably higher than the US$472.3m that Comtech had agreed to pay for its rival back in May. Under the terms of that transaction, Comtech was to pay US$372m in cash and approximately 4.4 million in newly issued Comtech shares. Based on Comtech’s share price of US$31.06 as of May 7, when the merger agreement was signed, the offer price values CPI at approximately US$16.40 per share. However, in mid-July Comtech’s share price fell by more than 30%, slashing the value of the deal and eventually leading to its cancellation in September.
Comtech subsequently received a termination fee of US$15m and under the terms of the merger agreement between CPI and Veritas, the former has agreed to pay a similar amount if it does not go through with the deal. For its part, Veritas must pay a termination fee of up to US$27.5m if it calls off the takeover agreement.
New York headquartered Veritas has been particularly active of late, particularly in the radio frequency and defense sectors. The sponsor paid approximately US$815m for Lockheed Martin’s weapons systems consultancy business Enterprise Integration Group in October, while more recently its RF semiconductor specialist, Aeroflex Holding, raised US$265m via an IPO on the NYSE. Post-listing, Veritas, alongside its fellow private equity investors Golden Gate Capital and Goldman Sachs, remains the majority shareholders in Aeroflex with a 76.6% holding. Aeroflex develops microwave integrated circuits for commercial satellites.
JP Morgan and Moelis & Company advised CPI on the transaction, with Irell & Manell providing legal advice. Skadden, Arps, Slate, Meagher & Flom, which also advised Comtech on its proposed takeover, provided legal advice to Veritas.
