Melville, New York-based Comtech Communications (Nasdaq: CMTL) has agreed to purchase Telecommunication Systems (Nasdaq: TSYS) for approximately $430.8 million cash in a deal aimed to create a company with a balanced footprint in both the U.S. government contracting and public safety markets.
Comtech said Monday it expects to close the transaction by the end of March 2016 and the deal is subject to both regulatory approval and a vote by TCS shareholders.
The deal breaks out to approximately $5.00 per share, or 13.9 percent above TCS’ closing stock price Friday and 28.6 percent over its 90-day average.
Shares in TCS have climbed 35.1 percent since it announced a strategic review of its business structure on July 6, while shares in Comtech had declined 29.16 percent since the calendar year’s start and 42.28 percent over 12 months prior to the markets’ open Monday.
Comtech estimates the combined company would have approximately 2, 000 employees and recorded $671.4 million in fiscal year 2015 revenue for the 12 months ended Sept. 30, 2015 with 47 percent in government and the other 53 percent in commercial markets.
Comtech has also agreed to pay off TCS’ approximate $143.6 million debt upon the deal’s closure.
TCS is headquartered in Annapolis, Maryland and generated approximately $364.1 million in fiscal 2015 revenue with a rough 50-50 split between the U.S. government and public safety markets through work on emergency response networks and federal contract vehicles for communications-related technology and services, according to investor slides on Comtech’s website.
TCS holds positions on federal vehicles such as the Defense Department‘s Custom SATCOM Solutions for commercial satellite services and the Department of Homeland Security‘s EAGLE II for information technology services.
The deal would establish Comtech as a prime contractor for the sale of its over-the-horizon microwave systems products, the company said.
TCS CEO Maurice Tose and Admiralty Partners Founder Jon Kutler, also company director, will both sell their stakes in TCS as part of the transaction.
Citigroup Global Markets and Proskauer Rose LLP are respectively acting as financial and legal advisers to Comtech, while Lazard is working with TCS on the deal’s financial aspects and Bryan Cave LLP is legal counsel.