Ultra Electronics agrees £180m Sparton acquisition
Defence, security, transport and energy company Ultra Electronics entered into a conditional merger agreement to acquire New York Stock Exchange-listed Sparton for $23.50 per Sparton share in cash, valuing Sparton's total equity at approximately $234.8m (£180.6m), it announced on Friday morning.
The FTSE 250 firm said that as part of the acquisition, Ultra would assume Sparton's net debt at completion.
Adjusting for the targeted cost savings, that equated to a pro forma FY 2016 EV/EBITDA multiple of 7.6 times.
“I am pleased to announce today the proposed acquisition of Sparton and associated equity placing,” said Ultra chief executive Rakesh Sharma.
“The acquisition of Sparton brings strategic and financial benefits to Ultra and the Ultra board recommends this acquisition to our investors.”
Ultra described Sparton as a provider of design, development and manufacturing services for “complex electromechanical devices”, as well as “sophisticated” engineered products.
Sparton has two reportable business segments - engineered components and products (ECP) and manufacturing and design services (MDS).
ECP is already Ultra's 50/50 partner in the long-standing ERAPSCO joint venture, which develops, manufactures and supports all US sonobuoys supplied to the US Department of Defense.
Ultra said its intention was to dispose of the MDS division by the end of the first quarter of 2018, as it considered it to be “non-core” to the combined group going forward.
It said it was already in “advanced discussions” with several interested parties in relation to this disposal.
“I am pleased to announce today the proposed acquisition of Sparton and associated equity placing,” said Ultra chief executive Rakesh Sharma.
“The acquisition of Sparton brings strategic and financial benefits to Ultra and the Ultra board recommends this acquisition to our investors.”
Ultra also announced the launch of a placing with institutional investors on Friday, consisting of 7,047,168 new ordinary shares of 5p each in the capital of Ultra, at a price of 1,950p per placing share, representing approximately 9.9% of Ultra's existing issued share capital.
The net proceeds of the placing would be used to part-fund the acquisition, with the remaining acquisition consideration being funded through drawdown under the Ultra Group's existing bank facilities.
Ultra’s board said the placing was not conditional upon completion of the acquisition, however.
“The combination of these two enterprises represents a unique opportunity to create a more robust supplier to the US DoD while simultaneously positioning the combined businesses to utilize assets in a much more efficient manner,” said Sparton interim chief executive Joseph Hartnett.