Kratos Acquires Southern Research Engineering Division Adding Unique Capabilities in Hypersonic, Ballistic Missile, Space and ISR Areas
24 May 2022 - 10:00PM
Kratos Defense & Security Solutions, Inc. (Nasdaq: KTOS), a
leading National Security Solutions provider, announced today that
it has acquired the Birmingham, Alabama based Engineering Division
of Southern Research for approximately $80 million, subject to
reduction based on working capital, including $75 million in cash
and $5 million in shares of Kratos common stock. Southern
Research’s Engineering Division (SRE) is the market leader in
assisting customers in the development, modeling and deployment of
advanced materials for extreme environments, including hypersonic,
space, missile, missile defense, strategic deterrence, propulsion
systems, and energy applications. SRE also specializes in
Intelligence Surveillance and Reconnaissance (ISR) sensor
development, electromechanical systems design and integration,
aerospace engineering, materials engineering, artificial
intelligence and machine learning, directed energy, RF systems
design and integration, advanced manufacturing, and computational
sciences.
Approximately 25 percent of the SRE purchase
price was paid for the one-of-a-kind, unique 54-acre campus, with
102,000 square feet of laboratory, material assessment, technology,
prototype development, secure, and other facilities, and the
machinery and equipment needed to perform the core, sole source
test and evaluation analysis and extreme environment
characterization of materials for Hypersonic, Missile Defense,
Strategic Deterrent, Space-related and other Systems. The balance
of the purchase price represents approximately 1.6 times SRE’s
historical, trailing twelve-month revenue, which includes
approximately $15 million in annual ISR and other unique product
development initiatives that are currently in development and
expected to transition to production. The acquisition establishes
Kratos SRE, a new business unit within Kratos’ Defense and Rocket
Support Services Division.
The acquisition brings to Kratos a team of
approximately 140 engineers, technicians and program support
professionals, substantially all of which hold national security
clearances. This dedicated group of professionals strengthens
Kratos’ Hypersonic and Missile System-related capabilities by
virtue of its market-leading advanced materials testing and
evaluation capabilities and experience. The SRE group plays a
unique and critical role in assisting the U.S. Government and
defense industry contractors to characterize and select strategic
materials for certain applications. SRE is also used widely by the
space community for launch, re-entry and other vehicles, systems,
and capabilities. “Kratos is the perfect home for my engineering
team,” said Michael Johns, former Southern Research Vice President
of Engineering and new Kratos SRE Senior Vice President. “From
Hypersonics to ISR applications, Kratos brings tremendous synergies
across all of our technical platforms. We have long been the leader
in understanding materials in extreme environments for applications
including Hypersonics, and as a result of this acquisition by
Kratos, we can carry those programs all the way through flight
testing and beyond, substantially increasing our total addressable
market opportunity.”
Dave Carter, President of Kratos’ Defense &
Rocket Support Services Division, said, "Kratos continues to lean
forward to develop and acquire capabilities and solutions that
expand our ability to support a diverse range of national security
customers. We are very excited about the technical capabilities and
synergies gained through this acquisition. Kratos SRE will continue
to provide independent, unbiased laboratory and ground testing
evaluation for unique and critical materials, and we will be
working to expand Kratos SRE’s testing and technology maturation
offerings to include affordable live fire tests using Kratos’
family of proven subscale launch vehicles. I am confident that our
similar cultures and values will enable a smooth transition and
lead to collaborative business opportunities with the Navy and
other customers. Establishing Kratos SRE as our Advanced Concepts
group demonstrates our commitment to Alabama and the growing
aerospace and defense community in Birmingham.”
Eric DeMarco, Kratos’ President and CEO, said,
“The acquisition of SRE enhances Kratos’ position related to the
anticipated significant future funding increases for the
recapitalization of Strategic Weapon Systems, including Hypersonic,
Space, Strategic Deterrence, Propulsion and Missile Defense
Systems. A priority of Kratos’ strategic thesis is being the market
leader, and Mike and his team clearly satisfy that requirement.
Once integrated with Kratos, based on recent program awards,
funding under the Department of Defense’s recently approved 2022,
and anticipated 2023, budget, and prospective customer acceptance
of certain SRE products in development that are nearing completion,
we expect an up and to the right future year-over-year organic
growth trajectory for the business beginning in 2023.”
DC Advisory served as exclusive financial
advisor and Maynard, Cooper & Gale, P.C. served as outside
legal counsel to Southern Research in this transaction.
About Kratos Defense & Security
SolutionsKratos Defense & Security Solutions,
Inc. (NASDAQ: KTOS) develops and fields transformative,
affordable technology, platforms, and systems for United States
National Security related customers, allies, and commercial
enterprises. Kratos is changing the way breakthrough technology for
these industries are rapidly brought to market through proven
commercial and venture capital backed approaches, including
proactive research and streamlined development processes. At
Kratos, affordability is a technology, and we specialize in
unmanned systems, satellite communications, cyber security/warfare,
microwave electronics, missile defense, hypersonic systems,
training, combat systems and next generation turbo jet and turbo
fan engine development. For more information, go to
www.KratosDefense.com.
Notice Regarding Forward-Looking
StatementsCertain statements in this press release may
constitute "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. These
forward-looking statements are made based on the current beliefs,
expectations, and assumptions of the management of Kratos and are
subject to significant risks and uncertainty. Investors are
cautioned not to place undue reliance on any such forward-looking
statements. All such forward-looking statements speak only as of
the date they are made, and Kratos undertakes no obligation to
update or revise these statements, whether as a result of new
information, future events or otherwise. Although Kratos believes
that the expectations reflected in these forward-looking statements
are reasonable, these statements involve many risks and
uncertainties that may cause actual results to differ materially
from what may be expressed or implied in these forward-looking
statements. For a further discussion of risks and uncertainties
that could cause actual results to differ from those expressed in
these forward-looking statements, as well as risks relating to the
business of Kratos in general, see the risk disclosures in the
Annual Report on Form 10-K of Kratos for the year ended December
26, 2021, and in subsequent reports on Forms 10-Q and 8-K and other
filings made with the U.S. Securities and Exchange Commission by
Kratos.
Press Contact:Yolanda White858-812-7302
Direct
Investor
Information:877-934-4687investor@kratosdefense.com
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