Britain’s Chemring Group recently said it has agreed to acquire Virginia-based The Allied Defense Group [ADG] for $59 million in cash, expanding its ammunition products and related services. T
The deal is expected to close within three months, subject to regulatory approvals by the U.S. government and ADG shareholder approvals. Chemring will pay $7.25 per share, a 54 percent premium to ADG’s stock price, at the close of business last Friday.
Chemring will be getting ADG’s Belgium-based Mecar SA, a provider of medium and large caliber ammunition, particularly for light armored vehicles, and Texas-based Mecar USA, which provides the U.S. government and prime contractors with load, assemble, pack and procurement services for ammunition.
Chemring has a broad based energetics business that includes pyrotechnics, explosive ordnance disposal, countermeasures and munitions. The munitions line provides small caliber munition, naval ammunition and 40mm grenades. Chemring also said the acquisition creates an internal customer for its propellants, explosives and fuzes while bolstering its precision machining capacity.
ADG has a strong customer base in the Middle East, which Chemring said complements its own focus on NATO customers.
“The acquisition of The Allied Defense Group will significantly enhance our business within the global ammunition and ammunition-related service markets,” David Price, Chemring’s CEO, said in a statement. “It provides a complementary range of products and manufacturing technologies and increases the strength of our product engineering capabilities.”
ADG has sold off several subsidiaries the past few years to focus on its core ammunition business. In 2008 Chemring acquired ADG’s Titan Dynamics business, which makes decoy countermeasures and energetic materials (Defense Daily, March 20, 2008).
Chemring has made 13 acquisitions dating back to 2005, a number of them in the United States. Most recently, the company acquired Hi-Shear Technology Corp., a supplier of energetics for space and satellite separation (Defense Daily, Sept. 17, 2009).
Chemring said the deal for ADG includes the assumption of debt, which it described as immaterial, and working capital of about $15 million. In addition, Chemring will incur about $5 million in costs related to shutting down ADG’s corporate office.
Through the first three quarters of 2009, ADG had $115.1 million in sales and a $2.4 million net loss. ADG said that given Chemring’s financial resources, the sale allow ADG’s MECAR businesses to pursue more business opportunities than they can now.