Mercury Systems [MRCY] on Monday said it has agreed to acquire Physical Optics Corporation (POC) in a $310 million cash deal that will broaden and complement its avionics and mission systems for the defense market.
The deal, which is subject to regulatory reviews and is expected to close by Jan. 1, 2021, will further scale Mercury’s avionics and systems business, add data transfer and recording solutions, and expand content on new and existing airborne platforms.
POC, which is based in California, expects to have about $126 million in sales in 2020. The company had over $113 million in sales in 2019. Mercury said the deal price represents a multiple of about 13 times POC’s next year’s operating income, adding the acquisition is expected to be immediately accretive to adjusted earnings per share.
“The acquisition of Physical Optics Corporation adds important capabilities on new and existing airborne platforms in the platform and mission management market,” Mark Aslett, Mercury’s president and CEO, said in a statement. “The combination of Mercury’s safety-certifiable and secure avionics processing solutions with POC’s deep portfolio of data storage, transfer, and encryption technologies will enable us to deliver more complete, pre-integrated avionics subsystems to our customers. POC has a similar growth profile to Mercury, supported by several key design wins that are transitioning into production.”
That growth profile is high single-digit to low double-digit sales increases.
POC has about 350 employees with more than 160 being highly skilled engineers. The company has more than 160 patents worldwide covering 60 technologies. POC’s senior management will remain with the company.
Some of the key aircraft modernization programs that POC contributes to include the F/A-18 and F-16 fighters, the H-60 family of helicopters, and the V-22 tiltrotor.
In addition to avionics and mission systems, POC’s product suite includes radio frequency and electronic warfare subsystems, sensors and scanners, cyber security technologies, artificial intelligence and deep learning capabilities, and emerging technologies such as a man-packable expeditionary tactical server and radar for counter-drone systems.