In a very surprising move on the day of its 3rd quarter 2011 earnings release, AML Communications (AMLJ.OB) announced that it would be acquired by Anaren, Inc. (ANEN) for $2.15 in an all-cash transaction (press release link).
The deal is worth $29.3m and is expected to close by June 30, 2011. I’ve included an excerpt of the press release below:
Anaren, Inc. (Nasdaq:ANEN) and AML Communications, Inc. (OTCBB:AMLJ) today jointly announced the signing of a definitive merger agreement whereby Anaren, through a subsidiary, has agreed to acquire all of AML’s outstanding shares of common stock for $2.15 per share in an all-cash transaction, representing an equity value of approximately $29.3 million and an enterprise value of approximately $22.6 million.
And quotes from the respective management team:
Lawrence A. Sala, Chairman, President and CEO of Anaren said, “We are very pleased to have reached this agreement with AML and believe the acquisition is consistent with Anaren’s growth, profitability, and innovation strategies. AML’s leading microwave amplifier technology is an excellent fit for the Space & Defense Group’s strategy to expand its technology base in order to capture a broader array of subsystem opportunities at our defense OEM customers.”
Jacob Inbar, Chairman, President and CEO of AML said, “We are excited about joining the Anaren team and the many new business and technology opportunities we can jointly pursue as a result. Moreover, the transaction provides our shareholders a significant premium to the recent trading price of their common stock. Being part of a larger organization will offer new and exciting opportunities for our employees; and we are confident AML’s current customers will benefit from our combined broader technology portfolio and manufacturing capabilities made possible by the acquisition.”
3rd Quarter Earnings
Before examining the transaction, a quick note on the 3rd quarter earnings.
The company reported revenues of $4.06m, down 4% from $4.26m in the same quarter last year. Net income was $333k, translating into $0.03 EPS, down one penny from the $0.04 per share last year.
The company’s cash balance grew to $4.7m compared to $3.3m in the prior-year quarter, and up sequentially from $4.5m in the quarter before.
The conference call was surprisingly brief, but Inbar did mentioned that they are still ramping up for a large order which affected this quarter’s results.
However, with the buyout offer on the table, the earnings become less important for the common shareholder.
The company had originally hired C.K. Cooper & Co back in July of 2010 to evaluate strategic alternatives.
After reading the press releases and listening to management on the conference calls, I thought that the talks were mostly around AMLJ acquiring another company (a viewpoint which I believe was shared by most investors).
This was confirmed in the earnings call yesterday, with Inbar explaining that the company had signed several LOIs and had explored (and documented) a wide range of possible transactions.
Either way, the news was certainly a pleasant surprise!
The deal represents a significant premium over the recent trading price of the stock, falling within the valuation range in my original writeup on AMLJ.
Using the EV number from the press release and AMLJ’s most recent EBIT and FCF figures (ttm), I calculate an EV/EBIT and EV/FCF ratio of 12x and 13.5x respectively, which seems fair.
I’m closing out my position in AMLJ in the ValueUncovered portfolio based on yesterday’s closing price of $2.08, for a gain of 64%.