Mercury Systems [MRCY] on Tuesday said it has acquired rugged computer maker Germane Systems for $45 million in cash, adding additional capabilities and customers in the U.S. and international defense markets for C4I subsystems.
Mercury President and CEO Mark Aslett said in a statement that combined with its $180 million acquisition earlier this year of Themis Computer, the acquisition of Germane “will enhance Mercury’s market penetration in the C4I market and provide additional capabilities for our customers.”
Aslett, speaking during the company’s fourth quarter earnings call on Tuesday, said the latest acquisition is a “great example” of the company’s strategy to expand its domestic and international business as well as its product offerings.
“Germane is a leading provider of rugged servers with C2I applications similar to Themis,” Aslett said. “Our intention is to combine Germane and Themis, creating a leading rugged server business serving the defense industry. We will inject our industry-leading security IP into their products where it makes sense to create highly differentiated secure rugged computing solutions.”
Mercury didn’t disclose Germane’s sales but Aslett said that combined with Themis, its rugged server business now has more than $100 million in revenue. He also said that 80 percent of Germane’s business is for naval subsurface and airborne applications while 80 percent of Themis’ work is for the surface Navy and ground forces.
Aslett also said the combination of Themis and Germane combined with organic capabilities makes Mercury one of the largest competitors in the market for rugged computing assets.
The Germane deal is expected to be accretive to Mercury’s adjusted earnings in its fiscal year 2019 that began on July 1.
Mercury posted $493.2 million in sales in its FY ’18 versus $408.6 million in FY ’17, with organic growth up 7 percent. Net income for the year was $40.9 million, 86 cents earnings per share (EPS), versus $24.9 million (58 cents EPS) a year ago.
In FY ’19, Mercury expects sales to be between $602 million and $624 million and earnings between 75 cents and 93 cents per share. Germane is expected to contribute $43 million in sales.
Aslett said Mercury will continue to look for strategic acquisitions that are accretive to earnings in the short-term.