Speedcast to buy UltiSat, seeks deeper US government footprint

Australia-based satellite services company Speedcast has agreed to acquire remote communications company UltiSat for up to $100 million in an effort to further expand across the U.S. public sector market, the companies said Monday.

Speedcast views the government and military satellite communication markets as having stabilized in the past two years after a long downturn and sees that addressable market growing to $9 billion in 2025 from the $4.8 billion estimated in 2017, according to an investor presentation on the deal.

Based in Gaithersburg, Md., UltiSat's customer base includes U.S. federal agencies along with international government organizations and non-governmental organizations across at least 130 companies.

Upon closure, Speedcast will create a new standalone government division to be led by UltiSat CEO Mohammad Abutaleb, who founded his company in 2003. That division will take on government and NGO customers from both companies.

Speedcast estimates the combined entity's pro forma government division revenue at $100 million and has targeted $200 million in public sector sales within five years, according to the investor presentation.

UltiSat generated $59.5 million in revenue last year and expects to record $78.5 million in sales this year at 31.9 percent growth. Speedcast reported $218 million in 2016 revenue at 30 percent year-over-year growth.

UltiSat's contract vehicles include the General Services Administration's Custom Satellite Communications Solutions small business portion and GSA IT Schedule 70. The company also holds a basic ordering agreement with NATO for commercial satellite equipment and services.

This deal comes nearly seven months after Speedcast announced its $425 million acquisition of the former Harris Corp. commercial maritime communications business. Harris kept CapRock's government contracts after that transaction closed in January.

Speedcast will pay $65 million at first to complete the deal and the remaining $35 million portion is subject to UltiSat's financial performance in 2018 and 2019. The initial payment will bring Speedcast's debt leverage ratio to 3 times earnings before interest, taxes, depreciation and amortization expenses.

The deal values UltiSat at 7 times EBITDA when excluding the $3 million in cost synergies Speedcast expects. That value comes down to roughly 5.5 times EBITDA when factoring in the synergies.

Both companies expect to close the transaction in the fourth quarter of this year subject to regulatory approvals and other closing conditions.

Speedcast was advised by Goodwin Procter LLP and Deloitte Global. UltiSat was advised by Pillsbury Winthrop Shaw Pittman LLP and Trinity Advisers.

About the Author

Ross Wilkers is a senior staff writer for Washington Technology. He can be reached at rwilkers@washingtontechnology.com. Follow him on Twitter: @rosswilkers. Also connect with him on LinkedIn.

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