Market Overview

Ultra Electronics Confirms Advanced Discussions to Acquire Sparton Corp.

Ultra (OTC: UEHPY) can confirm it is in advanced discussions to acquire the whole of the issued share capital of New York Stock Exchange listed Sparton Corporation (NYSE: SPA) (Ticker: SPA). Sparton's Engineered Components & Products ("ECP") division is Ultra's 50/50 partner in the long-standing ERAPSCO joint venture. Should Ultra acquire Sparton, it intends to sell Sparton's other business, the Manufacturing & Design Services ("MDS") division. In 2014, ERAPSCO was awarded an indefinite delivery indefinite quantity contract by the US Navy which runs until 2019; US$664m of purchase orders have been received in the first four years and a further $160m of purchase orders are expected to be added in FY18.
Ultra's participation in the ERAPSCO joint venture has brought an extensive knowledge, experience and proven performance to a major customer, the US DoD. Ultra is in a unique position to "preserve the status quo" for the US Navy and help to ensure that the delivery of critical assets to this major customer is not interrupted.
The principal reasons for Ultra pursuing the proposed acquisition of Sparton include:
·      The ECP Division of Sparton is an excellent strategic fit with Ultra's
existing activities in a market segment in which the Group has extensive
experience and well established customers
·      Enhances Ultra's continuing relationship with a major customer
·      Increases exposure to the growing sonobuoy segment
·      Attractive financial returns for Ultra
·      Allows Ultra to secure an important revenue and earnings stream
The Directors of Ultra intend to maintain a prudent funding structure for the Group and have a medium-term target range for a net debt to EBITDA ratio of below 1.5x. The acquisition, if agreed, is expected to be funded by Ultra's existing debt facilities and an equity placing of new shares representing up to 9.99 per cent. of Ultra's existing ordinary share capital.
The acquisition of Sparton and the disposal of MDS, if completed, are not expected to alter Ultra's objective of returning to a through-cycle target of 85% cash conversion in the medium term.
The acquisition of Sparton by Ultra would be subject to certain conditions including, inter alia, Ultra receiving certain approvals including from relevant regulators and antitrust authorities as well as approvals from both Sparton and Ultra shareholders.
A further announcement regarding Ultra's potential interest in Sparton will be made if and when appropriate.
Ultra released a pre-close statement on 22 June 2017.

Posted-In: M&A News


Related Articles (SPA + UEHPY)

View Comments and Join the Discussion!
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at