Baylin Technologies will be acquiring all of the issued and outstanding shares of Alga Microwave for total consideration of $27 million. Alga Microwave designs and develops RF and microwave components, and is a leading supplier of radio frequency and microwave solid state power amplifiers, pulsed amplifiers for radar applications, transmitter and transceiver products as well as radio frequency passive components and systems. The company has 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 Kirkland 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
The acquisition will also include 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. He spent the majority of his career at Alga, and has previous work experience at Wavesat Telecom and C-Mac / Selectron. He holds countless relationships with OEMs and has significant business development experience.
- Frank Panarello, COO of Alga to take on role of 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.
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.
The total amount consists of 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 for $6.2 million.
In connection with the acquisition of the Kirkland facility, 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 (Subscription Receipt Price) for gross proceeds of $20 million and $15 million principal amount of 6.5% extendible convertible unsecured debentures of the Company at a price of $1,000 per Debenture for aggregate gross proceeds of $35.0 million.
Baylin is to purchase all of the outstanding shares of Alga, through a newly incorporated subsidiary, for up-front consideration of $25.0 million (Share Purchase Price), subject to customary adjustments. The Share Purchase Price will be satisfied by the payment of $21.0 million in cash and $4.0 million in common shares in the capital of the company (Common Shares) at a price of $3.40 per share. The vendors may also receive up to an additional $2.0 million in earn-out payments if certain criteria are met over the two year period post-closing of the acquisition.
