Comtech to Buy Gilat Satellite Networks
Wednesday, January 29, 2020 | Comments

Comtech Telecommunications agreed to acquire Gilat Satellite Networks in a cash and stock transaction for $10.25 per Gilat ordinary share of which 70% will be paid in cash and 30% in Comtech common stock, resulting in an enterprise value of about $532.5 million.

Gilat is a worldwide satellite networking technology, solutions and services compay with market-leading positions in the satellite ground station and in-flight connectivity solutions markets and expertise in operating large network infrastructures. The combined companies would employ about 3,000 people and offer satellite technology, public safety and location technology, and secure wireless solutions to commercial and government customers around the world.

“I am excited to have reached this agreement with Gilat and believe this combination is beneficial to the stakeholders of both companies,” said Fred Kornberg, chairman of the board and CEO of Comtech. “The acquisition better positions Comtech to take advantage of key marketplace trends, particularly the growing demand for satellite connectivity and the enormous long-term opportunity set that is emerging in the secure wireless communications market. I believe that the combination of accelerating satellite connectivity demand and the increasing availability of low-cost satellite bandwidth makes this a perfect time to unify Comtech and Gilat’s solutions and offer our combined customers best-in-class platform-agnostic satellite ground station technologies.”

Comtech said the acquisition will drive global market access by creating a world leader with combined pro-forma sales approaching nearly $1 billion annually. The deal also broadens Comtech’s position in the rapidly growing in-flight connectivity and cellular backhaul markets, which are expected to expand given the availability of lower-cost bandwidth and the adoption of satellite technologies into the 5G cellular backhaul ecosystem.

Comtech expects to fund the acquisition and related transaction costs by redeploying a portion of its $100 million of pro forma combined cash and cash equivalents plus additional cash expected to be generated prior to closing, and by drawing on a new $800 million secured credit facility to be provided by several banks. Comtech expects that the cash interest rate on this facility will approximate 4% to 5% on an annual basis, before any origination fees.

Comtech also acquired CGC Technology for about $23.7 million, of which $11.6 million was settled in restricted stock and the remainder in cash. CGC is a U.K.-based provider of high-precision full-motion fixed and mobile X/Y satellite tracking antennas, reflectors, radomes and other ground station equipment around the world. With significant growth in low-earth orbit (LEO) and medium earth orbit (MEO) satellite constellations expected, the acquisition adds a growth dynamic and immediate relationships with several top-tier European aerospace companies and other government entities. The financial impact of the acquisition was not material to Comtech.

Finally, Senior Vice President and Chief Operating Officer (COO) Michael Porcelain was promoted and will assume the additional role of president. Porcelain has been with Comtech since 2002.

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