Comtech Telecommunications Corp. to acquire TeleCommunication Systems, Inc.

Comtech Telecommunications Corp. of Melville, NY and TeleCommunication Systems, Inc. of Annapolis, MD jointly announced on November 23 the signing of a definitive merger agreement under which Comtech will purchase TCS in a cash transaction for $5.00 per TCS share, or approximately a $430.8 million enterprise value. The $5.00 price per share represents a premium of 13.9% as compared to the last closing trading price of TCS common stock, a premium of 28.6% as compared to the volume-weighted average trading price over the last ninety trading days and a premium of 35.1% as compared to the last closing trading price one day after TCS’s July 6, 2015 announcement that its Board had formed a special committee to explore strategic alternatives to enhance stockholder value.

During the twelve months ended September 30, 2015, TCS reported revenue of $364.1 million and Adjusted EBITDA of $40.4 million, and during the twelve months ended July 31, 2015, Comtech reported revenue of $307.3 million and Adjusted EBITDA of $51.8 million. Based on the trailing twelve months reported for the two companies, pro forma combined revenue would have been $671.4 million, with Adjusted EBITDA of $92.2 million (excluding synergies). The combined companies employ about 2,000 people.

Dr. Stanton Sloane, President and Chief Executive Officer of Comtech, said, “We are excited to have reached this agreement with TCS and believe this combination is beneficial to the stakeholders of both companies. TCS is a unique business and a leading provider of mission-critical C4ISR solutions and next generation emergency 911 services to leading cellular and VoIP providers. The acquisition is a significant step in our strategy of entering complementary markets and expanding our domestic and international commercial offerings. We welcome TCS’s senior management and talented workforce to the Comtech team and are excited about the future.”

Maurice Tosé, President and Chief Executive Officer of TCS, said, “The TCS Board of Directors and management believe this strategic combination with Comtech is compelling and provides significant benefits for our stockholders, customers and employees. Our customers will benefit from greater resources and more diverse product offerings, and our employees will benefit from being part of a larger more diversified company.”

The acquisition is expected to be cash accretive in the first year of the acquisition and to result in approximately $12.0 million of synergies in the second year after closing (with approximately $8.0 million achieved in the first year after closing). Synergies are expected to be achieved by reduction of duplicate public company costs, reduced spending on maintaining multiple information technology systems and obtaining increased operating efficiencies throughout the combined company.

Dr. Sloane and Mr. Tosé jointly stated, “We are excited about the benefit that this transaction will bring to our customers and expect benefits from enhanced resources for both companies. We anticipate honoring and bringing enhanced resources to all existing agreements with customers, VARs, distributors, OEMs and other partners.”

Source: Comtech Telecommunications Corp.