Kratos Acquires Critical Infrastructure Systems Integration Business for $20M

January 02, 2012 SSI Staff

SAN DIEGO — Kratos Defense & Security Solutions Inc. announced on its Web site today it has acquired “selected assets of a critical infrastructure security and public safety system integration business from a large international public company” for $20 million.

The unnamed integration business is one of Kratos’ Public Safety & Security (PSS) business unit’s primary competitors across the United States, according to the statement. The acquired business designs, engineers, deploys, manages and maintains specialty security systems at some of the United States’ most strategic asset and critical infrastructure locations.

The statement continues:

Additionally, these security systems are typically integrated into command and control system infrastructure or command centers. Also similar to Kratos’ PSS business unit, approximately 15 percent of the acquired Business’ revenues are recurring in nature due to the operation, maintenance or sustainment of the security systems once deployed.

“The acquisition of this critical infrastructure and security business is a significant step for our PSS Division and all of Kratos. With this acquisition, we have essentially acquired one of our business’ most formidable competitors and significantly expanded Kratos’ PSS business capabilities, qualifications, customer relationships, contract portfolio and geographic depth and breadth,” states Ben Goodwin, president of Kratos’ PSS division.

Goodwin continues, saying the combined business will allow Kratos to bid on and pursue some of the nation’s largest, most sophisticated and important security deployments. “Also very importantly, the business we have acquired has previously been awarded a multi-year security system deployment at one of our country’s highest profile locations, with a potential future value of tens of millions of dollars, which provides added confidence in the success of this business going forward,” he says.

For 2012, the acquired business is expected to generate at least $35 to $45 million in revenue and at least $4 million to $5 million in adjusted EBITDA, after expected cost savings and synergies. The acquired business has more $20 million in customer accounts receivable and approximately $18 million in working capital. Kratos will also receive a tax benefit from the acquisition.

The $20 million cash transaction is subject to potential adjustment for working capital at closing, and the purchase agreement contains standard and typical indemnifications and other provisions.

B. Riley & Co. LLC acted as exclusive financial advisor to Kratos on the transaction.

Stay tuned to SSI for further details about the deal.

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