Codan agrees $33.6m acquisition of US-based Kägwerks
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The news: Technology manufacturer Codan will acquire US-based military communications solutions provider Kägwerks for an upfront cash payment of $33.6 million.
The numbers: In addition to the upfront consideration, Codan will make royalty payments for five years after the deal closes, which is expected to take place in early December. The royalties will be calculated on agreed annual sales target thresholds ranging from 1% to an upper limit of 5%. In the short to medium term, Codan expects the royalty rate to be between 1% and 2%.
Codan said that royalty payments will be funded from operational cashflow. The upfront acquisition consideration will be funded from Codan's existing debt facility, which has been increased from $170 million to $200 million.
Subject to government procurement cycles and purchase orders, Codan expects Kägwerks revenue to be between $49 million and $57 million during the first 12 months of its ownership. If this level of revenue is achieved, Codan estimates CY25 EBITDA in the range of $8 million to $11 million.
Kägwerks has developed a portfolio of propriety "DOCK" branded communications solutions, with over 30,000 products fielded to date across the US Army.
The context: Adelaide-based Codan, which designs and manufactures communications equipment, said the acquisition is part of the company's growth strategy to develop or purchase complementary intellectual property and technologies.
It noted that the addition of Kägwerks will position Codan's tactical communications business as a "US soldier communications solutions provider", providing it with "immediate credibility and name recognition" to compete in the US military marketplace.
What they said: "Kägwerks' intellectual property has been field-tested and accepted into US Department of Defense, and its proven pedigree enables us to participate in additional tenders for other programs," Codan's tactical communications president and executive general manager, Paul Sangster, said.
"The combined business also positions us to leverage international distribution channels, opening new growth and collaboration opportunities in global markets,."
The source: ASX announcement
