In a SENS released this morning, Poynting Holdings (Poynting) announced it has entered into a binding heads of agreement (HOA) with Antenna Research Associates (ARA) to acquire 100% of the issued share capital of ARA from its existing shareholders.
The total purchase consideration comprises USD5 million in cash, payable on closing of the acquisition, and 75 577 634 Poynting shares to be issued at the closing price on the date of closing of the acquisition.
Acquisition rationale
The rationale for the acquisition is based on clear synergies between Poynting Defence and Specialised (Poynting DS) and ARA. Poynting DS primarily sells to various countries in the world, but with relatively limited sales in the United States of America (USA). ARA, on the other hand, is a company operating in similar market segments in the USA.
The South Africa-based company, Poynting DS, designs and manufactures specialised wideband antennas and other related radio frequency (RF) products. These products sell in the electronic warfare (EW), frequency spectrum monitoring, test and measurement, communication and other specialised markets, and finds application in the system integration, frequency spectrum regulation and homeland security market space. Poynting DS has consistently grown turnover and profit since its establishment in 2005, with a cumulative annual growth rate (CAGR) of 26% over the past eight years.
The immediate and biggest opportunity for Poynting DS remains to establish a larger footprint in the US market. ARA, based in the USA, is a world-class supplier of RF and antenna systems to predominantly the military system integrator and homeland security markets. ARA is considered to be almost a replication of Poynting DS, but with more than 90% of sales being in the USA.
Commenting on the acquisition, interim CEO for Poynting Holdings, Jürgen Dresel says: “ARA is a logical extension of the Poynting DS business and all parties are excited about the apparent culture fit between the companies. In combining our business and product development expertise, we aim to grow into a significant industry leader in the defence market.”
Financial information of ARA
As at 30 April 2014 (last audited financial statements), the value of total assets of ARA was $9.6 million and the value of net assets was $2.1 million. Although ARA reported a loss before tax of $933 000 for the same year, the company is well on track to report in excess of $1 million profit after tax for their financial year ended 30 April 2015, due to the strategic plan for growth and a tactical plan for profitability, implemented by Logen Thiran. Thiran joined the ARA board of directors in February 2014 and was named the president and CEO of ARA in August 2014.
On the date that the acquisition transaction becomes effective, which is currently anticipated to be 1 July 2015, current majority shareholder of ARA, Pradeep Wahi will join the Poynting Holdings board and ARA CEO, Logen Thiran, will join the Poynting Group Executive Committee.
In closing, Dresel is excited about the future: “Today we realised a major milestone for ARA and Poynting in joining forces and to become one. I am very excited about this step. On behalf of the Poynting board, I would like to thank Pradeep and Logen both for accompanying us on this path. I am certain that we will learn a lot from each other and unlock significant synergetic shareholder value moving forward.”
