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Mercury Systems (MRCY) to Acquire Avionics Maker Avalex
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Mercury Systems (MRCY - Free Report) recently announced that it has signed a definitive agreement to acquire the Florida-based avionics maker, Avalex Technologies Corporation.
The aerospace and defense technology company will buy Avalex in an all-cash transaction, subject to net debt and net working capital adjustments. The transaction, which is expected to complete during the second quarter of fiscal 2022, will be funded through a combination of available cash and existing revolving credit facility.
Mercury Systems stated that the purchase is likely to be an asset sale for tax purposes. The buyout is anticipated to be immediately accretive to the company’s adjusted earnings per share.
Founded in 1992, Avalex is a global leader in designing innovative mission-critical avionic and electronics solutions for the aviation and aerospace industry. It specializes in manufacturing rugged avionics, which include digital mapping systems, cockpit pressure oxygen warning systems, cockpit management units, digital video recorders, mission computers and tablets. It is projected to generate revenues of $40 million with adjusted EBITDA margins of almost 25% by December next year.
The buyout will be a strategic fit for the company as Avalex’s product portfolio complements Mercury Systems' existing product portfolio. The integration of Avalex will strengthen its mission processing capabilities and display offering.
Moreover, the addition of innovative offerings like integrated smart-displays and communication management solutions to Mercury Systems' existing portfolio will reinforce its position in the global avionics business.
Mercury Systems' has a history of expanding through acquisitions. These buyouts have added significant value to the company and expanded its total addressable market. Since 2014, it has completed 13 acquisitions so far. In the fourth quarter of fiscal 2021, the company reported acquired revenues (16.3% of total revenues) of $40.8 million, primarily attributable to the acquisitions of Physical Optics Corporation and Pentek. We believe continued acquisitions will fuel the company’s growth in the days to ahead.
Mercury Systems' domain expertise in analog and digital integration has helped it build a solid business relationship with defense prime contractors for a long time. Modernization in radar, EW and C4I is high, providing the company with new opportunities in weapon systems, space, avionics processing, and mission computing and embedded rugged services. Also, fast-growing usage of parallel processing and HPC is prompting companies like Mercury Systems to leverage AI to solve real-world problems across industries.
However, the defense subsystems space is subject to intense competition from the likes of Lockheed Martin (LMT - Free Report) , Elbit Systems (ESLT - Free Report) and Northrop Grumman Corporation (NOC - Free Report) .
Nonetheless, Mercury Systems' parts are generally cheaper, which provides it a competitive edge in the market. The company currently carries a Zacks Rank #5 (Strong Sell).
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Mercury Systems (MRCY) to Acquire Avionics Maker Avalex
Mercury Systems (MRCY - Free Report) recently announced that it has signed a definitive agreement to acquire the Florida-based avionics maker, Avalex Technologies Corporation.
The aerospace and defense technology company will buy Avalex in an all-cash transaction, subject to net debt and net working capital adjustments. The transaction, which is expected to complete during the second quarter of fiscal 2022, will be funded through a combination of available cash and existing revolving credit facility.
Mercury Systems stated that the purchase is likely to be an asset sale for tax purposes. The buyout is anticipated to be immediately accretive to the company’s adjusted earnings per share.
Founded in 1992, Avalex is a global leader in designing innovative mission-critical avionic and electronics solutions for the aviation and aerospace industry. It specializes in manufacturing rugged avionics, which include digital mapping systems, cockpit pressure oxygen warning systems, cockpit management units, digital video recorders, mission computers and tablets. It is projected to generate revenues of $40 million with adjusted EBITDA margins of almost 25% by December next year.
The buyout will be a strategic fit for the company as Avalex’s product portfolio complements Mercury Systems' existing product portfolio. The integration of Avalex will strengthen its mission processing capabilities and display offering.
Moreover, the addition of innovative offerings like integrated smart-displays and communication management solutions to Mercury Systems' existing portfolio will reinforce its position in the global avionics business.
Mercury Systems Inc Price and Consensus
Mercury Systems Inc price-consensus-chart | Mercury Systems Inc Quote
Acquisitions: A Key Growth Driver
Mercury Systems' has a history of expanding through acquisitions. These buyouts have added significant value to the company and expanded its total addressable market. Since 2014, it has completed 13 acquisitions so far. In the fourth quarter of fiscal 2021, the company reported acquired revenues (16.3% of total revenues) of $40.8 million, primarily attributable to the acquisitions of Physical Optics Corporation and Pentek. We believe continued acquisitions will fuel the company’s growth in the days to ahead.
Mercury Systems' domain expertise in analog and digital integration has helped it build a solid business relationship with defense prime contractors for a long time. Modernization in radar, EW and C4I is high, providing the company with new opportunities in weapon systems, space, avionics processing, and mission computing and embedded rugged services. Also, fast-growing usage of parallel processing and HPC is prompting companies like Mercury Systems to leverage AI to solve real-world problems across industries.
However, the defense subsystems space is subject to intense competition from the likes of Lockheed Martin (LMT - Free Report) , Elbit Systems (ESLT - Free Report) and Northrop Grumman Corporation (NOC - Free Report) .
Nonetheless, Mercury Systems' parts are generally cheaper, which provides it a competitive edge in the market. The company currently carries a Zacks Rank #5 (Strong Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.