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The new year has started off with a bang – not only in the
US but throughout other markets
By James. H. Smith
January 05, 2006
In the US, Irvine Sensors Corporation announced on January 3 that it has
purchased 70 per cent of the stock of Texas-based privately held Optex
Systems, Inc for US$14 million.
Optex manufactures optical sighting systems and assemblies primarily for US
Department of Defense (DOD) applications, with its products are installed on
the majority of US military land vehicles, such as the Abrams and Bradley
fighting vehicles, Light Armored and Advanced Security Vehicles and have
been selected for installation on the Future Combat Systems (FCS) Stryker
vehicle.
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The deal is subject to adjustment upon completion of Optex's 2005 audit,
plus a cash earn-out of up to US$4 million payable over the next three years
if certain cashflow milestones are achieved.
The purchase was fully financed by a combination of US$4.9 million of senior
secured debt from Square 1 Bank under a four-year term loan and US$10
million of subordinated secured debt from Pequot Ventures, the private
equity arm of Pequot Capital Management, Inc.
Approximately US$7.4 million of the Pequot debt is convertible into common
stock of Irvine Sensors at the rate of US$2.60 per share, with the balance
potentially convertible at the same rate, subject to stockholder approval.
In connection with the Pequot financing, the company granted warrants to
purchase approximately 1,346,000 shares of Irvine Sensors common stock at an
exercise price of US$3.10 per share, of which approximately 344,000 shares
are subject to stockholder approval.
Irvine Sensors also received a US$2 million revolving line-of-credit from
Square 1 Bank to address its working capital requirements subsequent to the
Optex acquisition.
Subject to stockholder approval, the company will acquire the remaining 30
per cent of Optex's stock in exchange for the issuance of 2,692,308 shares
of Irvine Sensors' common stock. The authority for this subsequent
transaction, the conversion of the remaining portion of the Pequot debt and
the issuance of shares pursuant to contingent warrants will be sought at the
Irvine Sensors annual meeting of stockholders, scheduled for March 7, 2006.
If stockholder approval is not obtained, the balance of the Pequot debt of
approximately US$2.6 million will remain payable in cash in two years.
In Europe, Greece-based aerospace and defense procurement systems company
Epicos -- Electronic Procurements Industrial Cooperation and Offset Systems
-- is forecasting a two-fold increase in the number of its subscribers in
2006, a move that could lead the privately held company to pursue an initial
public offering in around two years time.
Also in Europe, European Aeronautic Defence & Space Company (EADS) said it
agreed to acquire, with ThyssenKrupp Technologies, German
naval-defense-electronics company Atlas Elektronik from BAE Systems PLC. BAE
Systems said EADS and ThyssenKrupp paid about EUR145 million (US$172
million).
The acquisition keeps one the few remaining German naval assets in German
hands.
EADS will own 40 per cent of Atlas, one of the world's largest providers of
sonar and other electronics for submarines, while the remaining 60 per cent
will be owned by ThyssenKrupp Technologies, a unit of German steel group
ThyssenKrupp AG.
The deal comes as a blow to French defense-electronics company Thales SA,
which bid for Atlas.
And, while the US Congress has undone the provision blocking the Pentagon
from buying Airbus military equipment, that doesn't mean the European plane
maker can take a large chunk of the US defense market.
The reversal of a measure passed by the House of Representatives in 2005 may
just be a tactical move in the continuing trade spat between the EU and the
US.
Disclaimer
James Smith is an independent columnist for this web site. James Smith may
hold long or short positions in any of the stocks mentioned in this article
and those positions can change at any moment.
InvestorIdeas.com Disclaimer:
www.InvestorIdeas.com/About/Disclaimer.asp, InvestorIdeas is not
affiliated or compensated by the companies mentioned in this article. James
Smith is a freelance writer. Nothing in the articles should be construed as
an offer or solicitation or recommendation to buy or sell any specific
products or securities. Past performance does not guarantee future results.
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