LONDON \u2014 Rising US electronic warfare requirements along with the opportunity to fill gaps in its capabilities in the sector were behind a move last week by Ultra Electronics to make its biggest ever acquisition \u2014 Kratos Defense & Security’s Electronic Products Division (EPD), according to the British company’s CEO, Rakesh Sharma.<\/p>\n\n\n\n
Ultra announced June 1 it was paying up to $265 million to buy out the designer and producer of radio frequency and microwave integrated systems and subsystems used in many of the US military’s key programs, including like<\/span> the P-8A Poseidon maritime patrol aircraft, the Trident nuclear missile and the EA-18G Growler. <\/p>\n\n\n\n That sort of acquisition number<\/span> price may almost be small change to the Lockheed Martins and BAE Systems of this world, but to a mid-cap British company with a turnover last year of \u00a3713 million (US $1.08 billion) it’s a lot of money to finance out of existing facilities. <\/p>\n\n\n\n The move has drawn the firepower of the normally acquisitive British company and only a couple of other small purchases are being looked at for the moment.<\/p>\n\n\n\n “We are unlikely to do anything size<\/span>able for the next 12 to 18 months but we do have some targets in the pipeline,” Sharma said. ….<\/span>“We have an interest in a couple of bolt-ins, where we can combine them with an existing business, these type of investments tend to be around the \u00a35 [million] to \u00a310 million mark and we may do something like that.” <\/p>\n\n\n\n Last year Ultra acquired a string of small companies, mostly in North America, including Forensic Technology of Canada, 3 Phoenix and ICE.<\/p>\n\n\n\n Even without the addition of the Kratos EPD business, North America already dominates Ultra revenues, accounting for 44 percent of sales last year with the Pentagon being its biggest single customer.<\/p>\n\n\n\n Nick Cunningham, an analyst at agency partners in the UK, said that while there have been budget issues in the US, it’s still the place for companies like Ultra to invest their money.<\/p>\n\n\n\n “It makes perfect sense. You go where the money is, and the US still accounts for 50 percent of the addressable defense market worldwide,” Cunningham said. <\/span>“Whichever version of the FY 2016 US defense budget gets approved, it is still going to have more procurement in it than FY 2015, and it will grow after that as well. Ultra are probably picking up on the EW market at a spending low.”<\/p>\n\n\n\n Sharma, though, said Ultra has been looking to make a size<\/span>able investment in the EW market for a long time as the company was under-represented in the sector.<\/p>\n\n\n\n “Although we were interested in the segment, trying to find the right asset at the right time is the thing that’s difficult,” the Ultra boss said. “It was just a confluence of circumstances where Kratos needed to divest their asset, and we were in a position where we were looking for something larger, and this was a perfect size as we were able to do it out of our free cash flow and debt.”<\/p>\n\n\n\n