By Calvin Biesecker
Satellite imagery provider GeoEye, Inc., [GEOY] yesterday said it has agreed to acquire SPADAC, Inc., for $46 million in cash and stock, bolstering its information services business by adding geospatial predictive analytic capabilities.
In addition, the GeoEye boosts its presence with its largest customer, the National Geo-Spatial Agency, one of more than 40 of SPADAC’s customers in the intelligence, defense and homeland security arenas. GeoEye said that SPADAC’s business isn’t concentrated in any particular agency, many of which will represent new customers for it.
About 90 percent of SPADAC’s $27 million in sales this year will be with the U.S. government, with the remainder coming from commercial and international customers, GeoEye officials said on a conference call with investors yesterday. GeoEye expects to do between $325 million and $330 million in sales this year, with over 60 percent of its business from the U.S. government.
GeoEye currently provides its customers with imagery of any place in the world at any times from commercial satellites. The SPADAC deal fits with GeoEye’s goal of boosting its information services offerings by combining imagery and other data to help customers with mission analysis.
“By combining our industry leading imagery collection capabilities with SPADACs location based analytics, we can help our customers gain unprecedented insight about the areas in which they operate,” Matt O’Connell, president and CEO of GeoEye, said on the conference call. “We believe we are the only company to provide this end to end capability.”
SPADAC, which is based in Northern Virginia, uses imagery, geographic data, public information and information supplied by its customers to “analyze where activities or events may occur that will affect, or are critical to their day-to-day operations,” O’Connell said. The company has key proprietary technology, notably algorithms for data mining and predictive analytics, and 150 employees made up of subject matter experts, geo-spatial analysts and intelligence professionals.
O’Connell said that in one city SPADAC worked with law enforcement officials to identify areas for a high risk of violent assault based on mining data about criminal activity and analyzing the occurrence of violent assaults.
SPADAC’s employees are typically embedded with their customers such as military commands, guaranteeing a relatively steady revenue stream, Joseph Greeves, chief financial officer of GeoEye, said. “Terrorism doesn’t have a seasonality factor so they’re working all the time,” he said.
SPADAC, which will be renamed GeoEye Analytics once the transaction closes as expected this month, is projected to grow sales by 30 percent in 2011, Greeves said. SPADAC’s operating margins are below GeoEye’s, which will cause a “slight decline our overall target margins of 30 percent for operating income,” Greeves said. He also said that amortization from goodwill associated with the deal may cause some minor dilution on earnings and earning per share next year.
GeoEye in 2003 acquired a minority stake in SPADAC and already supplies it with all of its imagery so the integration of the two firms is expected to go smoothly, O’Connell said. Most of SPADAC’s employees hold security clearances.
SPADAC’s financial adviser on the transaction is Sagent Advisors.