- Filing of certain prospectuses and communications in connection with business combination transactions (425)
11 May 2010 - 7:31AM
Edgar (US Regulatory)
Comtech to Acquire CPI for $472.3 Million in a
Strategic and Accretive Transaction
Expands One-Stop Shopping Approach for RF Microwave Products and
Provides Immediate Customer and Product Diversification
May 10, 2010
Filed by Comtech Telecommunications Corp.Pursuant to Rule 425 of the Securities Act of 1933and deemed filed pursuant to Rule 14a-12of the Securities Exchange Act of 1934Subject Company: CPI International, Inc.Commission File No.: 000-51928
+
|
Cautionary Statement Regarding Forward-Looking StatementsCertain information in this presentation contains forward-looking statements, including but not limited to, information relating to Comtech Telecommunications
Corp.'s ("Comtech" or the "Company") future performance and financial condition, plans and objectives of the Company's management and the Company's
assumptions regarding such future performance, financial condition, plans and objectives that involve certain significant known and unknown risks and uncertainties
and other factors not under the Company's control which may cause actual results, future performance and financial condition, and achievement of plans and
objectives of the Company's management to be materially different from the results, performance or other expectations implied by these forward-looking
statements. These factors include: the risk that the acquisition of CPI may not be consummated for reasons including that the conditions precedent to the
completion of the acquisition may not be satisfied; the possibility that the expected synergies from the proposed merger will not be realized, or will not be realized
within the anticipated time period; the risk that the Company's and CPI's businesses will not be integrated successfully; the possibility of disruption from the merger
making it more difficult to maintain business and operational relationships; any actions taken by either of the companies, including but not limited to, restructuring or
strategic initiatives (including capital investments or asset acquisitions or dispositions); the timing of receipt of, and the Company's performance on, new orders that
can cause significant fluctuations in net sales and operating results; the timing and funding of government contracts; adjustments to gross profits on long-term
contracts; risks associated with international sales, rapid technological change, evolving industry standards, frequent new product announcements and
enhancements, changing customer demands, and changes in prevailing economic and political conditions; risks associated with the results of ongoing
investigations into the Company's compliance with export regulations; risks associated with the Company's legal proceedings and other matters; risks associated
with the Company's MTS and BFT contracts; risks associated with the Company's obligations under its revolving credit facility; and other factors described in the
Company's and CPI's filings with the Securities and Exchange Commission.Participants in Solicitations Comtech, CPI and their respective directors, executive officers and other members of their management and employees may be deemed to be participants in the
solicitation of proxies from stockholders of CPI in connection with the merger. Information regarding Comtech's directors and officers is available in Comtech's
proxy statement on Schedule 14A for its 2009 annual meeting of stockholders, which was filed with the SEC on November 9, 2009. Information regarding CPI's
directors and executive officers is available in CPI's proxy statement on Schedule 14A for its 2010 annual meeting of stockholders, which was filed with the SEC on
January 20, 2010. Additional information regarding the interests of such potential participants will be included in the proxy statement and the other relevant
documents filed with the SEC when they become available.Additional Information about the Transaction and Where to Find ItThis presentation shall not constitute an offer of any securities for sale. The acquisition will be submitted to CPI's stockholders for their consideration. In connection
with the acquisition, Comtech and CPI intend to file relevant materials with the SEC, including the registration statement, the proxy statement/prospectus and other
relevant documents concerning the merger. Investors and stockholders of Comtech and CPI are urged to read the registration statement, the proxy
statement/prospectus and other relevant documents filed with the SEC when they become available, as well as any amendments or supplements to the documents
because they will contain important information about Comtech, CPI and the merger.Stockholders of Comtech and CPI can obtain more information about the proposed transaction by reviewing the Form 8-K to be filed by Comtech and CPI in
connection with the announcement of the entry into the merger agreement, and any other relevant documents filed with the SEC when they become available. The
registration statement, the proxy statement/prospectus and any other relevant materials (when they become available), and any other documents filed by Comtech
and CPI with the SEC, may be obtained free of charge at the SEC's web site at www.sec.gov. In addition, investors and stockholders may obtain free copies of the
documents filed with the SEC by directing a written request to: Comtech Telecommunications Corp., 68 South Service Road, Suite 230, Melville, New York 11747,
Attention: Investor Relations, or CPI International, Inc., 811 Hansen Way, Palo Alto, California 94303, Attention: Investor Relations. Investors and stockholders are
urged to read the registration statement, the proxy statement/prospectus and the other relevant materials when they become available before making any voting or
investment decision with respect to the merger.
|
3
Overview
On a pro forma basis, and excluding the impact of any additional acquisitions, Comtech
is anticipated to have between $150.0 million and $200.0 million of deployable cash
and have access to its $100.0 million unsecured revolving credit facility
TransactionFor each share of CPI common stock
owned, a CPI shareholder will receive, at
close, $9.00 in cash and a fraction of
Comtech common stock, which is subject
to a collar (see slide 9). The fraction is
currently valued at $7.40 per CPI shareThe $16.40 per share value represents a
premium of 25.7% as compared to the last
closing price of CPI and 21.3% as
compared to the last 30 trading day
average closing priceTotal enterprise value of the transaction is
$472.3 million Comtech will utilize approximately $372.0
million of its existing cash plus the
issuance of approximately 4.4 million
shares of common stockAll existing CPI debt is anticipated to be
repaid upon the closing of the transaction
Sales and EBITDA were $338.5 million
and $56.4 million, respectively, for its last
four fiscal quarters ended January 1, 2010A unique business and a leading global
supplier of vacuum electron devices which
are used in hundreds of critical
commercial and military applicationsAn extensive portfolio of over 4,500
microwave and power grid tubes sold into
90 countriesLarge global footprint with 17 sales and
service centers around the worldHeadquartered in Palo Alto, California with
approximately 1,500 employees
EBITDA represents earnings from continuing operations before interest, income taxes, depreciation and amortization of intangibles, acquired in-process research and development and stock-based compensation. The
Company's definition of EBITDA may differ from the definition of EBITDA used by CPI and other companies and may not be comparable to similarly titled measures used by other companies. EBITDA is also a measure
frequently requested by the Company's investors and analysts. The Company believes that investors and analysts may use EBITDA, along with other information contained in the Company's SEC filings, in assessing the
Company's operating results and ability to generate cash flow and service debt.
|
4
Key Strategic Benefits of the Transaction
Extends Comtech's One-Stop Shopping Approach for RF Microwave Products
+
Strategic BenefitsAlmost triples the size of Comtech's RF microwave amplifier segment and is anticipated to
generate over $50.0 million of EBITDA on an annual basisImmediately establishes Comtech as a leading global supplier of vacuum electron devices
(including klystron, traveling wave and power grid tubes)Drives further innovation by combining manufacturing, engineering and sales teams from
Comtech's XICOM branded-product group with CPI's Satcom product group Diversifies Comtech's product portfolio and customer baseApproximately 40% of CPI's sales are derived from annuity-like sales for replacements,
spares and repairsStrategically redeploys a significant portion of Comtech's existing cash to enhance earnings
per share and shareholder value
|
5
CPI's sales and EBITDA were $338.5 million and $56.4 million, respectively,
for its last four fiscal quarters ended January 1, 2010
CPI Provides Comtech with Immediate Customer and Product Diversification
Comtech Standalone % of Total Revenue (1)
Telecom Transmission Mobile Data RF Amplifiers
% of Revenue 0.35 0.45 0.2
Telecom
Transmission35%
RF
Microwave
Amp.20%
Mobile Data45%
Telecom Transmission Mobile Data RF Amplifiers
% of Revenue 0.22 0.29 0.49
Telecom
Transmission22%
RF
Microwave
Amp.49%
Mobile Data29%
US Gov't Domestic/Commercial
Revenue 0.65 0.35
Defense (3)65%
Commercial (3)35%
US Gov't Domestic/Commercial
Revenue 0.56 0.44
Defense (3)(4)56%
Commercial (3)(4)44%
Illustrative Pro Forma % of Total Revenue (2)
Comtech's total revenue was calculated based on Comtech's annualized reported results for the six months ended January 31, 2010.Illustrative pro forma revenue combines Comtech's annualized reported results for the six months ended January 31, 2010 and CPI's trailing four fiscal quarters
ended January 1, 2010.For purposes of this presentation, Comtech's defense revenue represents sales to the U.S. government and Commercial revenue represents sales to Domestic
and International customers, as defined in Comtech's filings with the SEC.CPI's defense revenues, as defined in CPI's filings with the SEC, represent CPI's Radar and Electronic Warfare markets. CPI's commercial revenue represents
sales to CPI's Medical, Communications, Industrial and Scientific markets.
|
6
Expands Comtech's One-Stop Shop Approach for RF Microwave Products
Radar/Electronic Warfare
Medical
Industrial
Communications
Scientific
CPI's radio frequency, microwave and power processing products add a new dimension to Comtech's product offerings
|
7
CPI's "FLAPS" Technology Opens an Exciting New Growth Market
"FLAPS" Technology Was Acquired By CPI Only A Few Years Ago Working Closely with Tier 1 Prime Contractors We Believe Comtech Can Accelerate FLAPS Adoption by Military Customers
Flat Parabolic Surface
("FLAPS") Based Antenna
Technology
We believe this product has
strong growth potential
Currently being tested and
deployed to enable data links
to UAV's
Targets military customers
around the world
|
8
Acquisition
Expected to be
Accretive
Year 1 Synergies
Are Expected to
Range from $1.0 to $2.0 millionYear 2 Synergies
Are Expected to
Range from $5.0 to $7.0 million
Acquisition Brings Over $50.0 Million of EBITDA to Comtech Plus Expected Cost Savings
Excluding the impact of amortization of intangibles associated with purchase accounting and
merger and integration related expenses, the acquisition is expected to be:Accretive in the first year that the acquisition closesSignificantly accretive beginning in the second year after the acquisition closes
Consolidate Comtech and CPI's satellite amplifier related manufacturing operationsCombine Comtech and CPI's California-based satellite amplifier related engineering operationsIntegrate Comtech and CPI's Massachusetts-based facilitiesEliminate duplicative public company expenses and redundant functions
Merger and
Integration Related
Expenses
Pursuant to newly adopted purchase accounting rules, merger and integration related
expenses are preliminary estimated to range from $18.0 million to $22.0 million
We Believe Revenue of ~$350.0 Million and Over $50.0 Million of EBITDA in Year 1 Is RealisticSynergies Are Expected to be Meaningful in Year 2 and Beyond High Familiarity with CPI's Satcom Business CPI's Satcom Business is in Close Proximity to Comtech's Santa Clara Facility CPI Senior Management is Expected to Stay and CPI Has a Talented Workforce
|
9
Additional Details on Transaction Structure and Explanation of Collar
DescriptionTotal consideration per share consists of a
combination of cash and stockCash component fixed at $9.00 per shareStock component subject to a collarThe total price per share is $16.40 based on
Comtech's closing stock price of $31.06 as of 5/7/10Represents $9.00 in cash + $7.40 in stock (0.2382
exchange ratio x $31.06)The total price per share is $17.10 within the collar
(Comtech stock price at closing(1) of $34.00 to $38.00)Calculation of Stock ComponentCollar mechanism will deliver $8.10 in stock value at
closing if Comtech's stock price at closing(1) is
between $34.00 and $38.00Actual number of Comtech shares to be received will
be determined by the following collar mechanism:A number of Comtech shares equal to $8.10 if
Comtech's stock price at closing(1) is between
$34.00 and $38.00 (floating exchange ratio)0.2382 of a share if Comtech's stock price at
closing(1) is $34.00 or less0.2132 of a share if Comtech's stock price at
closing(1) is $38.00 or more
Collar Illustration
Total Value Per Share to CPI
Comtech Stock Price at Closing
(1) To be calculated as the average Comtech price for the 5 consecutive trading days ending on (and including) the second trading day prior to closing.
$9 Cash +
$8.10 in Comtech Stock(floating exchange ratio)
$9 Cash +
0.2382 Comtech
Share(fixed exchange ratio)
$34.00
$17.10
$38.00
$9 Cash +
0.2132 Comtech
Share(fixed exchange ratio)
Value Per Share to CPI
(1)
(1)
Offer Value At
May 7, 2010
Comtech Price
$16.40
|
Cpi International, Inc. (MM) (NASDAQ:CPII)
Historical Stock Chart
From Sep 2024 to Oct 2024
Cpi International, Inc. (MM) (NASDAQ:CPII)
Historical Stock Chart
From Oct 2023 to Oct 2024
Real-Time news about Cpi International, Inc. (MM) (NASDAQ): 0 recent articles
More News Articles