Britain’s Cobham plc said on Wednesday that it has agreed to acquire the Global Microwave Systems (GMS) unit of The Allied Defense Group [ADG] for $26 million in cash in a deal that Cobham said would give it a physical presence on the West Coast of the United States for its intelligence and surveillance business.
ADG, which is suffering through a cash shortage which has forced it to curtail its spending and reschedule paying some of its own bills, said the cash from the sale will allow it to cover a potential put on some of its debt instruments that could be made later this year or early in 2009.
Last summer ADG shed two operating units to help it manage cash liquidity issues at the time.
The deal will also allow ADG to put more attention on its primary business, Ammunition, which has a backlog of over $35 million.
“ADG is committed to right-size, restructure and recapitalize to maximize value for all of our shareholders,” John Marcello, ADG’s president and CEO, said in a statement.
The transaction is expected to close in September and will require review by the Committee on Foreign Investment in the United States.
Based in California, the GMS business employs about 50 people in the design and manufacture of digital communications equipment used in the federal law enforcement community and defense markets.
For Cobham, which continues to expand its presence in the United States, the company said the acquisition offers complementary products and widens its customer base. GMS will become part of the Cobham Avionics and Surveillance Division.
“The acquisition of GMS adds proven engineering capability, complementary technologies and exciting opportunities for accelerating growth in the wider homeland security market through our law enforcement and national security business,” Allan Cook, Cobham’s CEO, said in a statement.
Despite the strong backlog at MECAR, ADG’s ammunition unit, contractual terms of sales agreements limit the ability its ability to ship to certain Middle Eastern clients in the summer, ADG said.
The company missed a deadline last month to repay $7.6 million in credit to a bank group. Since then ADG has paid $3 million and is working with the bank group to arrange a final payment next month.