Comtech Acquires Gilat Satellite Networks for $532.5 Million

Comtech Telecommunications has acquired Gilat Satellite Networks Ltd., a satellite networking technology solutions and services provider for approximately $532.5 million.

Key Strategic Benefits for Comtech Include:
  • Drives global market access by creating a world leader with combined proforma sales approaching nearly $1.0 billion annually
  • Strengthens Comtech’s position as a leading supplier of advanced communication solutions, uniquely capable of servicing the expanding need for ground infrastructure to support both existing and emerging satellite networks;
  • Expands Comtech’s product portfolio with highly complementary technologies, including Gilat’s high-performance TDMA-based satellite modems and its next-generation solid-state amplifiers;
  • Broadens leadership position in the rapidly growing in-flight connectivity and cellular backhaul markets which are expected to expand given the availability of lower-cost bandwidth and the adoption of satellite technologies into the 5G cellular backhaul ecosystem;
  • Bolsters world-class research and development capabilities, enabling Comtech to offer customers more complete end-to-end technology solutions;
  • Enhances ability to accelerate shareholder value creation by contributing to Comtech’s ongoing strategy to move toward higher-margin solutions and by increasing customer diversification geographically and by the market; and
  • Potentially offers increased liquidity for existing and new Comtech shareholders, as Comtech plans to pursue a dual listing on the Nasdaq and Tel Aviv Stock Exchange (“TASE”) to become effective upon the closing of the transaction.

The combined companies would employ approximately 3,000 people and offer best-in-class satellite technology, public safety and location technology and secure wireless solutions to commercial and government customers around the world.

Both companies’ talented global workforces are expected to remain in place and focus intently on meeting all customer commitments and expectations, including supporting all existing products, services and agreements. The transaction enlarges Comtech’s global market footprint with a significant physical presence in key international markets. This increased presence addresses a growing need for local touchpoints that can offer integrated secure connectivity solutions including public safety and location solutions. At the same time, Gilat will gain access to Comtech’s strong relationships with the U.S. government, allowing expanded distribution of Gilat’s products and solutions to the U.S. government. As such, Comtech believes the transaction carries minimal integration risk while creating numerous opportunities for potential long-term revenue and efficiency synergies going forward.

Fred Kornberg, Chairman of the Board and CEO of Comtech, said, ‘I am excited to have reached this agreement with Gilat and believe this combination is beneficial to the stakeholders of both companies. The acquisition will help Comtech to take advantage of key marketplace trends, particularly the growing demand for satellite connectivity and the enormous long-term opportunity set that is emerging in the secure wireless communications market. I believe that the combination of accelerating satellite connectivity demand and the increasing availability of low-cost satellite bandwidth makes this a perfect time to unify Comtech and Gilat’s solutions and offer our combined customers best-in-class platform-agnostic satellite ground station technologies. Gilat is an exceptional business that has developed extraordinary technology and has a well-respected product portfolio supported by strong research and development capabilities. I welcome Gilat’s entire talented workforce to the Comtech family.’

Dov Baharav, Chairman of the Board of Gilat, said, ‘The Gilat Board of Directors and management believe this highly strategic combination is compelling. It is an excellent outcome for our shareholders who receive both cash and an equity interest in a strong company with a broader range of products and the benefits of combined expertise and resources that are well-positioned to create future value against a highly favorable industry backdrop. I have long admired Comtech’s commitment to technology leadership and I firmly believe that employees will have expanded opportunities for career development. No doubt, the future will be very bright for Comtech and Gilat and all of our stakeholders.’

Comtech will continue to emphasize capturing growth opportunities from favorable market trends, including expected increased demand for solutions to provide high-speed in-flight satellite connectivity; the adoption of new satellite ground station technologies into the 5G cellular backhaul eco-system; and the expected need for equipment and network upgrades to accommodate an anticipated increase in satellite capacity when new Very High Throughput Satellites (“VHTS”) and high capacity Medium Earth Orbit (“MEO”) and Low Earth Orbit (“LEO”) satellite constellations are launched and fully operational. Together with its previously announced pending acquisition of UHP Networks, Comtech believes it will be uniquely positioned to take advantage of these important trends.

Leadership and Business Structure

Fred Kornberg, Comtech’s Chairman of the Board and Chief Executive Officer (CEO) will continue in his role as CEO of the combined company. Michael Porcelain, Comtech’s Chief Operating Officer, who was promoted and named President of Comtech earlier today, will work hand-in-hand with both Comtech and Gilat employees to maximize the potential of the combined company. Michael Bondi will continue in his role as Chief Financial Officer (CFO) of the combined company. Comtech will continue to maintain its headquarters in Melville, New York.

Post-closing of the transaction, Gilat will become a wholly-owned subsidiary of Comtech and will maintain its well renowned and highly regarded brand. Gilat will continue to maintain its corporate headquarters and research and development facility in Petah Tikva, Israel under the leadership of Yona Ovadia, Gilat’s CEO and Adi Sfadia, Gilat’s CFO. Mr. Sfadia will also be assuming the role of Gilat’s Chief Integration Officer, helping to plan a smooth acquisition and to maximize shareholder value.

No Comtech or Gilat facility locations are expected to be closed as a result of the transaction and each key business area is expected to continue to be led by its respective existing proven leadership teams after the transaction closes.

Transaction Structure and Terms

Under the terms of the agreement, unanimously approved by both companies’ Board of Directors, Gilat shareholders will receive total consideration of $10.25 per share, comprised of $7.18 per share in cash and 0.08425 of a share of Comtech common stock for each share of Gilat held. The total consideration of $10.25 represents a premium of approximately 14.52% to Gilat’s 90-day volume-weighted average trading price. Upon completion of the transaction, Gilat’s shareholders will own approximately 16.1% of the combined company.

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