Defense electronics supplier Mercury Systems [MRCY] on Wednesday said it has agreed to acquire three defense electronics businesses from Microsemi Corp. [MSCC] for $300 million, creating what is said to be the industry’s largest commercial embedded secure processing company.
The transaction is subject to regulatory approval and is expected to close by June 30.
Mercury said the Microsemi businesses it is acquiring had combined sales of about $100 million and operating earnings of about $28 million for the 12 month period ending last September. The embedded security, RF and microwave and custom microelectronics businesses of Microsemi have about 275 employees combined.
“The transaction adds secure solid-state storage to our array of industry leading, pre-integrated processing subsystems capabilities,” Mark Aslett, Mercury’s president and CEO, said in a statement. “It nearly doubles the size of our RF and microwave business, adding new capabilities, scale and synergies. In addition, it provides us with new capabilities in embedded security and mixed signal system-on-chip processing. All these capabilities are highly aligned with our business from a strategic perspective, so there couldn’t be a better fit with our existing strategy and solutions portfolio.”
Massachusetts-based Mercury also said the deal gives it access to new growth markets, customers and programs, including precision-guided munitions (PGM) and missiles programs like Paveway, Precision Guidance Kit, Small Diameter Bomb II, and Phalanx. Other programs include the F-35 fighter, P-3 maritime patrol aircraft, KC-46A tanker, F-16 fighter and the Airborne Warning and Control System aircraft (AWACS).
Customers of the Microsemi businesses include Boeing [BA], L-3 Communications [LLL], Lockheed Martin [LMT], Northrop Grumman [NOC], Raytheon [RTN] and the Defense Department.
Mercury said the acquired businesses have little or no overlap with its own. Mercury expects the deal to be highly accretive to its FY ’17 adjusted earnings per share. The company had $235 million in sales in its FY ’17 and $10.4 million in net income.
Mercury is funding the deal through $265 million in financing and $50 million of cash on hand.
Microsemi said the pending divestitures allow it to focus attention and investment on higher value solutions for aerospace and defense, communications, industrial and storage end markets.