Boston, MA 04/08/2014 (wallstreetpr) – Arotech Corporation (NASDAQ:ARTX) provides security and defense products. The company recently announced acquisition of UEC Electronic. It hopes to integrate the business into its battery and power division. But what impact can investors expect from the acquisition of UEC?
Aerotech announced that the deal to acquire UEC involved initial price of $28 million to be met in cash, and common stock amounting to about 0.78 million shares. Moreover, Aerotech agreed to $5.5 million in earn-out over the next two years.
The cost and expected contribution of the acquisition is worth understanding so that investors may know what to expect. Arotech Corporation (NASDAQ:ARTX) announced that it will be able to fund $5.5 million of the transaction costs through its own cash. And for the remainder, it was able to secure a favorable borrowing to finance the acquisition. The loan will be paid back over the next five years.
The management stated that they expect to meet the loan repayment from their cash flow. The key takeaways from the announcement were that the company has no plans for share dilution or debt to finance the acquisition. This is important because investors are relieved of potential valuation dilution.
Revenue contribution
UEC is involved in the making of electronic components, mostly for use in aerospace, military and industrial environments. UEC specializes in the manufacture and provision of hybrid power systems, smart power and aircraft systems support. It serves the U.S. military among other contractors. According to Arotech chairman and CEO Robert S. Ehrlich, UEC is highly complementary, which means that it will be easy to integrate into their battery and power unit. The combination is expected to open many and more markets for the division. Moreover, UEC brings engineering and manufacturing expertise which will be very helpful in creating top military and commercial grade power systems and battery technology.
Efficient use of resources
Combining UEC and the battery and power unit of Arotech Corporation (NASDAQ:ARTX) will not only result in better engineering and manufacturing technology, but also efficient use of resources through sharing. Moreover, the combination is expected to boost sales and marketing efforts, thus leading to higher revenue and profits.
Investor takeaway
Looking at the financing arrangement for the deal and the fact that UEC brings superior engineering and manufacturing technology, the deal seems to have a lot to offer.
