16th Jan 2008 07:01
Cobham PLC16 January 2008 Ref 232 16 January 2008 COBHAM REACHES AGREEMENT TO PURCHASE US INTELLIGENCE AND MISSILE DEFENCE COMPANY FOR $416 MILLION Transaction Highlights • Cobham is to purchase SPARTA Inc., a US company that offers a range of scientific, systems engineering and technical assistance services, for US$416 million in cash. This transaction continues the successful execution of Cobham's growth strategy. • SPARTA will place Cobham in a leading position within the high growth US Intelligence and Missile Defence markets. SPARTA has strong technical capabilities and loyal customer relationships, many of which have endured over decades. • SPARTA is a further important step in the development of Cobham's US business and assuming the completion of this acquisition and the Lansdale Sensors and Antennas transaction, Cobham's total pro-forma US revenue in the last twelve months would have been circa $1.4 billion. • SPARTA has an experienced and strong incumbent management team, who will continue to run the company as a strategic business unit within Cobham. Summary Cobham plc ('Cobham') is pleased to announce that it has reached agreement topurchase SPARTA Inc. ('SPARTA'), an employee-owned US company which is SECregistered, but unquoted. The cash consideration for SPARTA is up to US$416million on a debt and cash free basis, of which US$381 million will be payableon completion and satisfied from Cobham's existing cash and debt facilities,with the balance of up to US$35 million to be paid over the next three years toholders of unvested options who remain with the company. The acquisition isexpected to complete in the second quarter of 2008, subject to regulatory andSPARTA shareholder approvals. SPARTA, which is run from Washington D.C., will after a short period ofassimilation and subject to appropriate approvals become a separate strategicbusiness unit within an expanded North America Cobham Division. During thisassimilation phase, SPARTA will report to Andy Stevens, Cobham Chief OperatingOfficer, in accordance with the applicable US Government industrial securityregulations. Financial Information For the year ended 30 December 2006 SPARTA generated operating profits ofUS$28.6 million and EBITDA(1) of US$34.3 million on revenue of US$297.3 million.At 30 September 2007, gross assets were approximately US$122.0 million. Thetotal cash consideration represents a multiple of approximately 12.1x 2006EBITDA(1). It is expected that the acquisition will be earnings enhancing in2008. Allan Cook, Cobham Chief Executive, said: "I am delighted that we have been able to reach agreement to acquire SPARTA,which is one of the leading companies in areas of critical importance in theprovision of US National Security. The strong incumbent management will provideCobham with an exciting platform for growth in the Systems Engineering andTechnical Assistance segment, which is complementary to our existing USintelligence and defence capabilities. This is a major step forward in theimplementation of Cobham's technology strategy and the creation of a significantTier 2 business supplying the US DoD and intelligence markets." - ends - ENQUIRIES Cobham plc Allan Cook, Chief Executive +44 (0)1202 882020Warren Tucker, Chief Financial Officer +44 (0)1202 882020Julian Wais, Director of Investor Relations +44 (0)20 7318 9570 (on the day) +44 (0)1202 857998 Weber Shandwick Financial Susan Ellis/James White +44 (0)20 7067 0700 (1) before US$2m of non-cash stock-based compensation charge. Information on the Business SPARTA employs approximately 1,200 people based across 20 US sites, withprincipal locations in and around Washington D.C., in Huntsville, Alabama,Southern California and Colorado Springs. The workforce is highly qualified,with a deep and robust pool of engineering and scientific talent and wideexperience in solving demanding engineering and technical problems. Asubstantial proportion of SPARTA's workforce has US security clearances.SPARTA's management team has extensive experience in the sector and willcontinue to run and grow the strategic business unit after completion of theacquisition. SPARTA brings a unique and distinct set of Systems Engineering and TechnicalAssistance ('SETA') capabilities to Cobham, which immediately gains a leadingposition in a new business segment and the opportunity to leverage capabilitiesand customer relationships for its existing technologies. Within Intelligence ('Intel'), SPARTA provides a full range of products andservices including the planning and direction, collection, processing, analysisand production of information for the US intelligence community. In addition,SPARTA provides other Intel related services including tools for network andinformation security and develops protection systems using models andsimulations. Within Missile Defence, SPARTA provides technical solutions and capabilitiesincluding systems engineering, modelling and simulation, test and evaluation,operations and sustainment planning and battle management, primarily to the USMissile Defense Agency. It has had an important role for almost thirty years inthe development and deployment of effective US ballistic missile defencesystems. SPARTA also provides training, testing and evaluation services for UStactical systems, including supportability analysis and training for UnmannedAircraft Systems programmes. SPARTA has leveraged its core capabilities into a number of other markets,including engineering and development of Net Centric Warfare systems, modellingand simulation of Space systems and engineering services to a variety of USGovernment customers. The military composites business is well positioned andincreases Cobham's ship set value on the F-22 and F-35. SPARTA'S business is primarily focused on classified work. Accordingly, subjectto US Government approval, SPARTA will operate under an SSA ('Special SecurityAgreement') in conjunction with Cobham's existing classified programmes and itis intended that three senior 'Outside Directors' will be appointed to the Boardof the SSA. All the outside directors provide assurance on security matters andstrategic guidance on defence and market trends. Rationale and benefits of the acquisition The acquisition is consistent with Cobham's stated strategy of increasingshareholder value through organic growth and selective, value enhancingacquisitions in aerospace and defence markets. This acquisition together with the recently completed acquisition of S-TEC andthe announced acquisition of the Lansdale US Sensors and Antennas business,demonstrates a significant and successful acceleration in the delivery ofCobham's US development objectives. It represents a major step forward in theimplementation of Cobham's technology strategy and the creation of a significantbusiness supplying the US DoD and Intel needs. SPARTA will transform Cobham's position in the high growth US intelligencemarket and presents further growth opportunities in the technical services,intelligence, ELINT (Electronic Signals Intelligence) and SIGINT (SignalsIntelligence) markets. It will add technology focused systems engineering andsupport capabilities underpinning through-life programmes, which areincreasingly desired by customers across all defence markets. These skills canbe used across a number of Cobham's US businesses where such support capabilityis becoming increasingly important. The intelligence capabilities and customer relationships within SPARTA are anexcellent fit with Cobham's Law Enforcement and National Security businesses.SPARTA has technology focused engineering capabilities which are highlycomplementary to Cobham's Defence Electronic Systems Division, particularly inareas such as radar performance modelling, Network Centric Warfare and thesynthesis of data collected through sensor applications Historical growth in SPARTA's markets has been at double digits and this isanticipated to moderate a little to single digits in the future.. As aconsequence of SPARTA's capabilities, Cobham will aim to gain market share inthe Intel segment and to develop the business further. It is anticipated thatthe SPARTA team will begin to drive further growth through acquisitions, whichhave hitherto been precluded due to its previous ownership structure. Thisacquisition represents both a complementary fit for Cobham in the continueddevelopment of important markets and existing products and serves as a platformfor further rapid growth. - ends - NOTES 1. Cobham plc is an international company engaged in the development,delivery and support of advanced aerospace and defence systems for land, sea andair platforms. The Company specialises in the provision of components,sub-systems and services that keep people safe, improve communications andenhance the performance of aerospace and defence platforms. 2. Cobham Defence Electronic Systems (CDES) designs and manufacturesmicrowave components, integrated assemblies and sub-systems for the USDepartment of Defense and other military and government customers around theworld. It is a leading developer of all classes of air, ground and shipboardantenna sub-systems, positioners, radomes, high-power microwave components andintegrated assemblies, and is the market leader for many niche microwaveproducts. CDES is also the world leader in advanced tactical military vehicleintercom systems and soldier and ground vehicle situation awareness products. Nothing in this press release should be construed as a profit forecast or beinterpreted to mean that the future earnings per share of Cobham willnecessarily be the same as, or greater than, the earnings per share forcompleted financial periods. This document contains 'forward-looking statements' with respect to thefinancial condition, results of operations and business of Cobham and to certainof Cobham's plans and objectives with respect to these items. Forward-looking statements are sometimes but not always identified by their useof a date in the future or such words as 'anticipates', 'aims', 'due', 'could','may', 'should', 'expects', 'believes', 'intends', 'plans', 'targets', 'goal',or 'estimates'. By their very nature, forward-looking statements are inherentlyunpredictable, speculative and involve risk and uncertainty because they relateto events and depend on circumstances that may or will occur in the future. There are various factors that could cause actual results and developments todiffer materially from those expressed or implied by these forward-lookingstatements. These factors include, but are not limited to, changes in theeconomies, political situations and markets in which the Group operates; changesin government priorities due to programme reviews or revisions to strategicobjectives; changes in the regulatory or competition frameworks in which theGroup operates; the impact of legal or other proceedings against or which affectthe Group; changes to or delays in programmes in which the Group is involved;the completion of acquisitions and divestitures and changes in exchange rates. All written or verbal forward-looking statements, made in this document or madesubsequently, which are attributable to Cobham or any other member of the Groupor persons acting on their behalf are expressly qualified in their entirety bythe factors referred to above. Cobham does not intend to update theseforward-looking statements. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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