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Tuesday, Feb 27, 2024

Kratos Defense to Sell Stock, Buy Antenna Maker

Kratos Defense & Security Solutions Inc. (Nasdaq: KTOS) plans to sell some $200 million worth of common stock in a follow-on offering. It told securities regulators of its plans on June 17.

Separately, on June 16, Kratos said it agreed to buy ASC Signal, a Texas-based satellite communications antenna maker, from Communications & Power Industries LLC of Palo Alto for $35 million cash. The deal is expected to close within 60 days.

Kratos said the business will complement its core space business. Phil Carrai, the executive leading Kratos’ space division, said in a statement that ASC would be an “important building block” for Kratos’ growing ground segment business.

ASC Signal makes antenna systems for satellite communications, radar, electronic warfare and high-frequency applications. Customers include broadcasters and Fortune 500 companies, satellite and launch operators, telecom carriers, ground network service providers, Earth observation research and meteorological data providers, and military and government organizations.

Kratos’ existing satellite communications business serves commercial, government and military clients. Kratos also produces unmanned aircraft and a variety of defense electronics and subsystems. It had $718 million in revenue last year, up from $618 million the previous year, and has about 3,000 employees. As of March 29, the business’ total backlog was $646.8 million.

Strategic Acquisitions Eyed

Kratos said it planned to use net proceeds from its $200 million stock offering for general corporate purposes, including strategic “tuck in” acquisitions, and to help grow its business and further its long-term strategy. In a prospectus, Kratos said it might use proceeds for working capital or to repay debt. According to a securities filing, as of March 29 the business had about $295 million in long-term debt.

Goldman Sachs & Co. LLC is sole book-running manager for the offering. The underwriters have an option to buy an extra $30 million of stock.

In May, Kratos announced it acquired Technical Directions Inc., which makes small jet engines.

In a statement on its pending acquisition, Kratos said demand for Earth station antennas is growing as operators launch more high-throughput satellites. There is also a need to tend small satellites; so-called mega-constellations need “substantial ground infrastructure,” the business said.

CPI, the business selling ASC to Kratos, did not hold ASC very long. It bought the business in 2015. As the sale was playing out, CPI was completing another acquisition, taking on General Dynamics’ antenna systems division.


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