Baylin Technologies Inc. announced that it has entered into a share purchase agreement to acquire all of the issued and outstanding shares of Alga Microwave Inc. for total consideration of $27 million, consisting of up-front cash consideration of $21 million, $4 million in Baylin shares and $2 million in deferred consideration, as well as a related agreement to purchase Alga’s operational facilities in Kirkland, Quebec.

In connection with the Acquisition, Baylin has entered into an agreement on a “bought deal” basis with a syndicate of underwriters led by Raymond James Ltd. for an offering of 6,451,613 subscription receipts of the company at a price of $3.10 per subscription receipt for gross proceeds of $20 million and $15 million principal amount of 6.5 percent extendible convertible unsecured debentures of the company at a price of $1,000 per debenture for aggregate gross proceeds of $35.0 million.

“The addition of Alga is synergistic with our recent acquisition of Advantech, helping us to further expand our rapidly growing RF and microwave components business. Alga’s new state-of-the-art facility, situated closely to Advantech, will set the stage for a robust platform for future growth,” said Randy Dewey, Baylin’s president and CEO. “We look forward to working with the team at Alga to incorporate their top-of-the-line products into Baylin’s broad offering to provide the best experience for our customers,” said Dewey.

“As a market leader in RF and microwave, we are a natural fit in helping Baylin achieve its vision of becoming the frontrunner in data transmission. We are very excited to be able to bring our deep sector expertise and best-in-class product development capabilities to Baylin to help drive growth and profitability in the satellite connectivity segment. Alga will be able to leverage Baylin’s world-class sales force and relationships with tier-one customers to expand the reach of our products,” said Michael Perelshtein, Alga’s CEO.

“This acquisition is a key strategic move that is expected to benefit both operations in a significant way. Alga's modern factory and precision machining capability will allow us to control more of the supply chain and provide for rapid product development. Additionally, Alga brings extensive high frequency passive microwave component capability expanding our addressable markets.  Bringing together both Advantech’s broad portfolio, sales and marketing channels along with Alga's manufacturing efficiencies, products and passive capabilities will allow us to address a wider more diversified market and provide our customers with broader networking solutions,” says John Restivo, president, Advantech.

Baylin is to purchase all of the outstanding shares of Alga, through a newly incorporated subsidiary, for up-front consideration of $25 million, subject to customary adjustments. The share purchase price will be satisfied by the payment of $21 million in cash and $4 million in common shares in the capital of the company at a price of $3.40 per share. The vendors may also receive up to an additional $2 million in earn-out payments if certain criteria are met over the two year period post-closing of the acquisition.

Alga is a market leader in the engineering, design and development of RF and microwave components and a leading supplier of RF and microwave solid state power amplifiers, pulsed amplifiers for radar applications, transmitter and transceiver products as well as RF passive components and systems. Alga enjoys a fast development cycle for its products, which has been a key success factor. Alga’s product offering covers all major frequency standards.

Expected benefits of the Acquisition for Baylin include:

  • Strategic acquisition expected to generate revenue and cost synergies
  • Enhances one of Baylin’s faster growing segments, Satellite Connectivity Products
    • The acquisition represents a unique and strategic opportunity to expand its radio frequency and microwave components business, which the company entered into with its acquisition of assets from Advantech Wireless Inc. in January 2018
  • Expected to be accretive to 2018 earnings per share
  • Immediate cost savings identified
  • Alga’s principals to take on executive positions at Baylin, adding further depth and experience
    • Michael Perelshtein, president and CEO of Alga to take on role of Chief Operating Officer of Alga, with oversight of both Advantech and Alga operations. Michael spent the majority of his career at Alga, and has previous work experience at Wavesat Telecom and C-Mac/Selectron. Michael holds countless relationships with OEMs and has significant business development experience.
    • Frank Panarello, COO of Alga to take on role vice president Operations of Alga, with oversight of both Advantech and Alga operations. Frank is an experienced operations and finance professional who has a decade of experience at Alga and previously worked at Nortel Networks.

In connection with the closing of the acquisition, Baylin has also agreed to acquire the facility in which the operations of Alga are located in Kirkland, Quebec for a total purchase price of $6.2 million.

The closing of the acquisition is subject to a number of closing conditions including the approval of the Toronto Stock Exchange and is expected to close on or about July 16, 2018.