BIO-key to buy Aether Mobile Government Division

BIO-key International Inc. will buy Aether Systems Inc.'s Mobile Government Division for $10 million in cash, officials of Eagan, Minn., BIO-key announced Monday.

The combined companies will be the largest U.S. provider of wireless information technologies for law enforcement and public safety organizations, according to BIO-key officials.

Aether's Mobile Government Division is the market leader of wireless data services in the United States, with annual revenue of about $19 million, according to BIO-key Chairman Tom Colatosti.

The acquisition will allow BIO-key to "more cost effectively and creatively develop technology and products, and more effectively integrate and deploy our sales and marketing resources," said Mike DePasquale, BIO-key's chief executive officer.

BIO-key provides finger-based biometric identification and wireless public safety software. Aether Systems of Owings Mills, Md., provides mobile and wireless data services to businesses in the transportation industry and to government agencies and departments through its two operating units, Transportation and Mobile Government.

Aether Systems is selling both divisions and implementing a new business strategy, in which it will focus on building and managing a leveraged portfolio of residential mortgage-backed securities, company officials said.

Last month, Aether Systems' officials announced plans to sell the company's Transportation Division to an affiliate of Platinum Equity for $25 million in cash.

David Oros, Aether's chairman and chief executive officer, said last month that company officials considered growing Aether's operations through acquisitions and additional investment, but decided that the new business strategy would allow the company to become profitable much faster.

Included in BIO-key's acquisition are net working capital of $4.5 million and the assumption of $10.75 million of certain customer performance guarantees backed by letters of credits and performance bonds. BIO-key officials said they think these guarantees can be replaced with less than $1 million cash from the company. They said the Aether Systems' purchase will be financed with BIO-key's existing cash resources and new debt.

Colatosti and DePasquale said they believe the acquisition will add to revenue and earnings beginning in the fourth quarter of 2004.