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Military Microwaves Supplement
CPI International Holding Corp. and its wholly owned subsidiary CPI International Inc. (CPI), a leading provider of microwave, radio frequency (RF), power and control solutions for critical defense, communications, medical and other applications, announced they have entered into a definitive agreement to acquire the Codan Satcom business from Codan Limited (ASX: CDA). Codan Satcom is a prominent supplier of solid-state RF subsystems for satellite communications services to commercial and government end users. Codan Satcom has operations in Newton, South Australia and Boalsburg, Pa.
Under the terms of the agreement, CPI will acquire Codan Satcom for a payment of $9 million in cash, subject to certain adjustments, to be funded entirely from cash on hand. If certain financial and other objectives are achieved in the two years following the acquisition, CPI has also agreed to make additional earnout payments to Codan of up to $4.5 million. CPI will acquire certain of the Australian-based assets of Codan Satcom, as well as Codan Satcom's Pennsylvania-based Locus Microwave operations. The Pennsylvania-based operations were formerly Locus Microwave, Inc., a manufacturer of microwave radio products for satellite communications, before that company was acquired by Codan Limited in April 2009.
CPI intends to integrate the Codan Satcom business into its Communications & Medical Products Division in Ontario, Canada. The Australian-based operations of Codan Satcom, which design and manufacture C-band and Ku-band subsystems and block-up converters (BUCs), will be relocated to CPI's existing Canadian facilities over a period of approximately nine months. The Pennsylvania-based Locus Microwave operations, which design and manufacture X-band and Ku-band BUCs, primarily for military communications applications, will remain in their current location and are expected to expand as CPI increases the capabilities of those operations. CPI plans to retain a number of key research and development personnel from the Australian-based operations and establish a local engineering center for these employees.
"Codan Satcom has been recognized as a well-established world leader in solid-state RF subsystems for satellite communications for many years," said Joe Caldarelli, chief executive officer of CPI. "They have successfully served a global base of customers with specialized products and world-class manufacturing expertise. CPI and Codan Satcom serve many of the same commercial and military communications customers, and Codan Satcom's excellent reputation and worldwide coverage will both complement and expand CPI's current business in the satellite communications market. With the addition of Codan Satcom's BUCs to CPI's existing portfolio of solid-state and vacuum electron device-based satellite communications products, we believe CPI will offer customers the most complete line of satellite communications amplifiers operating at all satellite uplink frequencies and power levels. Additionally, Codan Satcom's Locus Microwave operations have developed excellent product coverage for X-band military communications applications, which are widely expected to enjoy significant growth over the next several years as numerous dedicated government X-band satellite communications networks, including the Wideband Global Satellite Communications (WGS) network, are deployed."
Donald McGurk, managing director and chief executive officer of Codan Limited, stated, "As we evaluated strategic alternatives for our Satcom business, Codan's key objective was to ensure that we found a buyer who had the focus, resources and desire necessary to nurture and grow the satellite communications business to its fullest potential. We feel that we found that buyer in CPI, and we are confident that our customers will continue to be served well under their management. Sharing many of the same values and goals as Codan, CPI has the required expertise in manufacturing high-quality RF products, a global sales and distribution channel and decades of experience in providing excellent customer service for the demanding satellite communications market. We are pleased that Codan Satcom is being acquired by CPI."
The acquisition of Codan Satcom, which is expected to close by the end of June, is projected to contribute approximately $20 million in sales to CPI annually. Once the relocation of the Australian-based operations has been completed and excluding the impact of purchase accounting, the acquisition is expected to be accretive for CPI. The acquisition is subject to customary closing conditions.
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