Aeroflex To Be Acquired By UK-based Cobham In $1.46 Bln Deal

(RTTNews) - Aeroflex Holding Corp. (ARX), a provider of high performance microelectronic components and test and measurement equipment, Tuesday said it has agreed to be acquired by UK-based Cobham Plc. (COB.L) for $10.50 per share in cash. Total transaction value is about $1.46 billion, including the assumption of Aeroflex's net debt of $540 million at March 31.

Cobham,a defense and aerospace supplier, expects the acquisition to be significantly accretive to underlying earnings in 2015 and to have a broadly neutral impact on underlying earnings in the current year. Expected returns will beat Cobham's cost of capital in the third full year of ownership. The transaction is expected to close during the third calendar quarter of 2014.

The offer represents a premium of 26.1 percent over Aeroflex's closing stock price on May 19. The agreement has been approved by Aeroflex's Board of Directors.

Veritas Capital Fund III, L.P., Golden Gate Private Equity, Inc. and GS Direct, L.L.C. have committed to vote in favor of this deal.

Goldman, Sachs & Co. is acting as lead financial advisor and Stifel is acting as co-financial advisor to Aeroflex.

Schulte Roth & Zabel LLP is acting as legal counsel and Richards Layton & Finger, P.A. is acting as special Delaware legal counsel.

Len Borow, Aeroflex's CEO, said, "We believe Aeroflex and Cobham are a natural fit and that Aeroflex will benefit from the larger scale, market presence, and resources of the combined organization."

Meanwhile, Cobham said the acquisition is consistent with its strategic objective of building and maintaining leading positions in selected higher growth, high technology commercial segments.

Aeroflex has complementary products and customers in its Microelectronic Systems business, including passive and active microwave components, integrated microwave assemblies and slip rings. This will enhance Cobham's position as a tier three supplier, and help generate additional revenue synergies.

Further, Aeroflex increases Cobham's exposure to growing commercial segments and strengthens key customer relationships in wireless, space, microelectronics, industrial, energy and other sectors.

This is expected to increase the enlarged Group's commercial revenue from 35 percent to 41 percent of the total, on a pro forma basis.

Aeroflex is expected to deliver highly attractive financial returns. Significant additional value is expected from the combined entity of $85 million in annual synergies from cost savings and operational efficiency improvements.

This is from a total investment of $215 million, with the majority of the program expected to be implemented in the first three years of ownership.

Cobham proposes to finance the acquisition, which includes the refinancing of existing debt facilities of Aeroflex, through bank facilities.

In order to maintain an appropriate level of gearing, the acquisition financing will include the proceeds of an equity placing of up to 6 percent of Cobham's current issued share capital.

In a separate statement, the firm announced a placing of around 65 million ordinary shares of 2.5 pence each, representing approximately 6 percent of the current issued share capital of the company.

ARX closed up 0.6 percent on Monday at $8.31. Cobham gained 1.7 percent in early morning trading at 317.60 pence.