Kratos Defense & Security Solutions, Inc., a San Diego, CA-based national security solutions provider, announced on August 24 that it has completed the previously announced sale of the U.S. and U.K. operations of its Electronic Products Division (the “EPD Operations”) to Ultra Electronics Holdings plc for $260 million in cash plus up to $5 million for taxes incurred as part of the transaction, less a $2.0 million escrow to satisfy any purchase price adjustments and a working capital adjustment currently estimated as a net reduction of $7.6 million (the “Transaction”). The Company expects to pay $13 million in transaction-related costs and approximately $10 million in federal and state income taxes, resulting in net cash proceeds to the Company of approximately $232.4 million.
Kratos’ Microwave Electronic Products business post-Transaction includes operations and manufacturing facilities in Israel that provide Solid State Power Amplifiers (SSPAs), Integrated Microwave Assemblies (IMAs), beam forming modules, waveform and signal generators and other electronic subsystems for missile, electronic warfare, radar, satellite communications, precision guided munitions, unmanned systems, navigation warfare and other platforms, primarily for international defense customers.
Major programs supported by Kratos’ Microwave Electronic Products business include Iron Dome, BARAK, SPYDER, David’s Sling, Arrow, and Eurofighter. Additionally, in 2013, Kratos reorganized to better align its businesses with the Company’s strategic plan, combining its unmanned command, control, communications, airborne avionics, ground and seaborne systems business, formerly a part of EPD, with Kratos’ Unmanned Systems Division. These assets also remain with Kratos post-Transaction.
Kratos currently intends to use proceeds from the Transaction to initiate a repurchase process for up to $175 million of its 7 Percent Senior Secured Notes (the “Notes”) at par. In addition, Kratos has paid down all outstanding amounts on its $110 million bank credit facility, which totaled approximately $41 million. In connection with the Transaction, the Company also amended its credit facility to allow for this divestiture as well as provide a permanent reduction in the financial covenants for future periods under the credit agreement.
Source: Kratos Defense & Security Solutions