Comtech acquiring Gilat for $533 million

WASHINGTON — Comtech is buying Gilat Satellite tv for pc Networks for $532.5 million, a transfer the corporate says will place it to capitalize on giant anticipated demand for brand spanking new floor phase infrastructure.

Melville, New York-based Comtech Telecommunications Corp introduced the Gilat acquisition Jan. 29, the identical day it mentioned it will additionally purchase antenna builder CGC Know-how Restricted in the UK for about $23.7 million. 

In a Jan. 29 earnings name, Comtech executives mentioned advances in satellite tv for pc communications applied sciences, coupled with rising demand for inflight connectivity, 5G backhaul over satellite tv for pc, and safe navy communications are driving demand for satellite tv for pc floor infrastructure. 

“There may be an accelerating development within the provide of low value bandwidth,” mentioned Michael Porcelain, Comtech’s president and chief working officer. “Like every know-how, the decrease the associated fee, usually the extra folks can afford to make use of it, and on this case we consider they are going to.”

Comtech is shopping for Gilat for $10.25 a share, paid 70% in money and 30% in Comtech inventory. Comtech expects the mixed firm will generate near $1 billion in annual gross sales. 

Fred Kornberg, chief govt of Comtech, mentioned Israel-based Gilat shouldn’t be a competitor to Comtech as a result of the 2 corporations have completely different product strengths and geographic exposures.

“We’re basically in the identical markets supplying communications customers, however supplying completely different merchandise,” he mentioned. 

Comtech frequently sells satellite tv for pc floor tools to the U.S. authorities, whereas Gilat is much extra profitable in worldwide markets, he mentioned. Collectively the businesses can cross-sell into one another’s respective markets, he mentioned. 

Comtech mentioned it would listing its shares on the Nasdaq and Tel Aviv Inventory Exchanges as soon as the merger closes, which Porcelain mentioned is predicted by July however might take till December.

Kornberg mentioned Gilat will carry experience in satellite tv for pc person terminals that use a communications technique referred to as Time Division A number of Entry, or TDMA, that’s helpful for networks with a number of terminals that don’t must switch knowledge throughout lengthy distances. 

“We’ve had no experience in there,” he mentioned. “That brings us this brand-new know-how, in addition to one other product line.”

Kornberg mentioned Comtech’s background is with Single Channel Per Service, or SCPC, a satellite tv for pc communications technique that makes use of devoted point-to-point hyperlinks for transferring video and knowledge. 

Dov Baharav, Gilat’s board chairman, mentioned Gilat has modems in additional than 500 networks globally. He mentioned Gilat will search to promote modems, amplifiers and antennas to the U.S. navy as a Comtech subsidiary. 

Comtech executives mentioned they anticipate to maintain all Comtech’s and Gilat’s areas open and totally staffed after the acquisition closes. The businesses anticipate to shed $2 million in prices related to public itemizing by buying and selling as a single firm. 

“Each corporations’ proficient world workforces are anticipated to stay in place,” Porcelain mentioned. 

In a information launch, Comtech mentioned it’s drawing on a brand new $800 million mortgage from a community of seven banks to finance the Gilat buy. Comtech expects the mortgage to have a money rate of interest of 4-5% yearly, although the precise phrases are usually not finalized. 

Comtech can also be shopping for very small aperture terminal supplier UHP Community of Canada for $40 million in a deal introduced in November. 

Kornberg mentioned Gilat and UHP Networks will fill a TDMA void in Comtech’s product line. Gilat may also broaden Comtech’s presence within the inflight leisure and connectivity market. 

Kornberg mentioned Comtech sells amplifiers to aviation connectivity clients, whereas Gilat sells modems. Gilat has additionally developed a brand new electronically steered antenna to be used on plane that Comtech is assured “may have a vibrant future,” he mentioned. 

Kornberg mentioned shopping for CGC Know-how was “complementary” to Gilat, for the reason that two corporations promote several types of antennas. CGC Know-how’s antennas are mechanically steered and are designed to be used as floor stations for satellite tv for pc constellations in medium Earth orbit and under. 

Comtech’s purchases are the most recent in a latest wave of broader floor phase acquisitions. Singapore-based ST Engineering accomplished its $281 million buy of Belgian floor phase provider Newtec in October, and Canadian IT providers firm CGI Group accomplished its $103.2 million acquisition of Dublin-based Scisys in December. 

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