ESCO Announces Acquisition of Navy Supplier
ESCO Technologies (NYSE: ESE) announced the acquisition of Signature Management & Power from Ultra Maritime for $550 million. The acquisition will be funded through a combination of cash and debt. Signature Management & Power provides critical naval defense solutions, including signature and power management systems for submarines and surface ships in the US and UK markets. The acquisition is expected to generate $175 million in revenue in 2024, with higher EBITDA margins compared to ESCO's existing Aerospace & Defense segment. This move aligns with ESCO's strategy to shift towards high-margin, high-growth end-markets and expands its footprint in international defense markets.
- Acquisition price of $550 million funded through cash and incremental debt.
- Signature Management & Power expected to generate $175 million in 2024 revenue.
- Higher EBITDA margins compared to ESCO's current Aerospace & Defense segment.
- Expansion into international naval defense markets.
- Addition of 410 employees and four facilities in the US and UK.
- Strengthening of ESCO's existing naval programs with complementary products.
- Incremental debt taken on to fund the acquisition.
Insights
The acquisition of Signature Management & Power by ESCO Technologies is a significant move. By funding the $550 million purchase through a combination of cash on hand and incremental debt, ESCO is leveraging its capital to enhance growth opportunities. This acquisition is expected to contribute an additional $175 million in revenue for 2024, which is substantial. Considering the high Adjusted EBITDA margins anticipated, this deal aligns well with ESCO's strategy of shifting towards high-margin, high-growth end-markets.
There are key financial implications here. First, the acquisition is likely to improve ESCO's top-line growth and profitability, given the complementary nature of the acquired business. Second, the mix of cash and debt used for funding can impact the company's balance sheet. Investors should keep an eye on debt levels and how they are managed moving forward. Additionally, the increased content on domestic and international naval programs could provide sustained revenue streams.
In the short term, investors might see fluctuations due to integration costs and potential changes in capital structure. However, in the long term, the acquisition could enhance shareholder value by bolstering ESCO's strategic position in the defense sector.
Overall, this deal demonstrates ESCO's commitment to growth and alignment with its strategic goals.
This acquisition highlights ESCO's strategic maneuver into the defense market, particularly in naval defense. Signature Management & Power's expertise in signature and power management solutions for submarines and surface ships aligns perfectly with increasing global naval defense spending. The products, such as magnetic and electric field countermeasures and ultra-quiet ship propulsion systems, are pivotal for modern naval operations.
The sole-source supplier status with US and UK naval programs ensures a robust and reliable revenue stream, which is important in defense contracts. The acquisition also opens opportunities for ESCO in emerging international naval markets, enhancing its global footprint.
From a strategic standpoint, this move strengthens ESCO's position in the high-value defense technology sector, potentially providing a competitive edge in future defense bids and projects. The long-standing relationships and established reputation of Signature Management & Power within the naval community could offer substantial benefits.
While the integration process poses risks, the long-term prospects appear promising, with enhanced capabilities and market reach likely leading to sustained growth.
- Sole Source Supplier for US & UK Naval Defense Markets - Continues Shift Towards High Margin/High Growth End-Markets - Adds IP-Rich Strategic Capabilities in Defense -
St. Louis, July 08, 2024 (GLOBE NEWSWIRE) -- ESCO Technologies Inc. (NYSE: ESE) today announced that it has agreed to acquire the Signature Management & Power (or the “Business”) business of Ultra Maritime for a purchase price of
The Business’ Signature Management and Power Management product lines and their deep engineering capabilities are highly complementary to ESCO’s current naval programs. Signature Management offers solutions for surface ships and submarines that provide magnetic and electric field countermeasures to prevent underwater mine and sensor detection. Power Management provides innovative and highly-engineered motors that drive critical ship propulsion systems with an ultra-quiet design ensuring low vibration levels to increase stealth capabilities.
The Business is headquartered in Long Island, New York, operates out of four facilities based in the US and the UK, and has approximately 410 employees. Signature Management & Power will become part of ESCO’s Aerospace & Defense (A&D) segment and is expected to have approximately
Bryan Sayler, ESCO’s President and Chief Executive Officer, commented, “I’m excited to welcome the outstanding management team and dedicated employees of Signature Management & Power to ESCO. Their product offerings complement our existing submarine and defense-related platforms, providing increased content on domestic naval programs and expansion into international defense markets for our A&D segment.
“Signature Management & Power is a long-tenured Navy supplier with sole source content on major existing platforms and significant growth opportunities on emerging international naval programs. Their addition adds scale to our A&D portfolio and continues our shift in business mix towards high growth, high margin end-markets. We’ve been clear on our stated M&A goals and we are very pleased that this acquisition squarely meets all of them.”
Pete Crawford, Chief Executive Officer of Ultra Maritime Signature Management & Power, said, “With our shared focus as a trusted supplier with deep naval electronics capabilities, I am excited to join the ESCO team and work together to continue delivering for our customers’ key missions. The transaction also represents a great outcome for our company and employees, with significant opportunities for growth ahead of us.”
ESCO was represented by J.P. Morgan Securities LLC as exclusive financial advisor and Bryan Cave Leighton Paisner LLP as legal advisor on this transaction. Lazard served as sole financial advisor and Weil, Gotshal & Manges (London) LLP served as legal advisor to Ultra Maritime Signature Management & Power.
Conference Call
The Company will host a conference call tomorrow, July 9, at 7:30 a.m. Central Time, to discuss the acquisition. A live audio webcast and an accompanying slide presentation will be available in the Investor Center of ESCO’s website. For those unable to participate, a webcast replay will be available after the call in the Investor Center of ESCO’s website.
Forward-Looking Statement
Statements contained in this release regarding future growth, growth strategy, expectations, beliefs and benefits resulting from the acquisition, and other statements which are not strictly historical are considered “forward-looking statements” within the meaning of the safe harbor provisions of the Federal securities laws. There is no assurance that the acquisition will be consummated, and there are a number of risks and uncertainties that could cause actual results to differ materially from the forward-looking statements made herein. The risks and uncertainties in connection with such forward-looking statements related to the acquisition include, but are not limited to, the ability and timing to consummate the acquisition, including obtaining the required regulatory approvals and financing to fund the acquisition; ESCO’s ability to promptly and effectively integrate the acquired business after the acquisition has closed, and ESCO’s ability to obtain expected cost savings and synergies of the acquisition; operating costs, customer loss and business disruption (including difficulties maintaining relationships with the employees, customers or suppliers of the acquired business) that may be greater than expected following the consummation of the acquisition; and other risks and uncertainties described in Item 1A, Risk Factors, of ESCO’s annual report on Form 10-K for the year ended September 30, 2023.
ESCO is a global provider of highly engineered products and solutions serving diverse end-markets. It manufactures filtration and fluid control products for the aviation, Navy, space, and process markets worldwide and composite-based products and solutions for Navy, defense, and industrial customers. ESCO is an industry leader in designing and manufacturing RF test and measurement products and systems; and provides diagnostic instruments, software and services to industrial power users and the electric utility and renewable energy industries. Headquartered in St. Louis, Missouri, ESCO and its subsidiaries have offices and manufacturing facilities worldwide. For more information on ESCO and its subsidiaries, visit ESCO’s website at www.escotechnologies.com.
SOURCE ESCO Technologies Inc.
Kate Lowrey, Vice President of Investor Relations, (314) 213-7277
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