Mercury Systems has signed a definitive agreement with Microsemi Corporation to acquire three of its businesses - embedded security, RF and Microwave, and the custom microelectronics businesses of Microsemi. For the twelve months ended September 27, 2015, these businesses had combined revenues of approximately $100 million and pro forma standalone adjusted EBITDA of approximately $28 million. The businesses are primarily focused on the defense electronics market and employ a total of approximately 275 people based at facilities in Phoenix, Ariz., Camarillo, Calif., San Jose, Calif., and West Lafayette, Ind.
Pursuant to the terms of the agreement, Mercury will acquire these businesses for a total purchase price of $300 million. The acquisition and associated transaction expenses are expected to be funded with a combination of committed financing for a new $265 million bank term loan A and approximately $50 million of Mercury’s cash on hand. In addition to the term loan, the financing also includes a new $75 million revolving credit facility which is not expected to be drawn at closing. The transaction is expected to be highly accretive to fiscal 2017 adjusted EPS and adjusted EBITDA margin.
This acquisition will make Mercury Systems to be one of the largest commercial embedded secure processing companines for the defense sector. The transaction will add secure solid-state storage to their array of pre-integrated processing subsystems capabilities. It doubles the size of their RF and Microwave business, adding new capabilities, scale and synergies. In addition, it provides will give them new capabilities in embedded security and mixed signal system-on-chip processing.
The acquisition is subject to customary closing conditions, including approval pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976. The transaction is currently expected to close during Mercury's fiscal 2016 fourth quarter ending June 30, 2016.
