EM Solutions Acquired by EOS Communications

Canberra, Australia, October 1, 2019--Electro Optic Systems (ASX: EOS) has agreed to acquire space communications company EM Solutions Pty Limited (EMS), an Australian technology company in the field of microwave satellite communications.EMS will form part of EOS Communication Systems.

EOS recently announced that it had achieved a number of advances which together enable next-generation optical communication to and from space at bandwidths up to 20 times higher than microwave technology, and at lower cost. However, the company has long recognised that over US$ 400 billion is currently invested in microwave communication infrastructure in space, and that this sunk cost and the all-weather capabilities of microwave technology will ensure a long-term role for microwave technology in space communications.

EMS is a major provider of satellite communication systems for the Australian Defence Force, including Royal Australian Navy ships, and has been widely recognised for its advanced technology, winning awards such as the Essington Lewis Trophy (2018) Department of Defence SME Team of the Year, for innovation in defence communication. EMS’ on-the-move radio and satellite products deliver high speed telecommunications anywhere in the world to its customers. It is a trusted provider of secure and resilient communications for key customers such as defence forces and government agencies internationally.

EOS has acquired 100% of all issued shares in EMS in exchange for 4,271,357 EOS ordinary shares and a cash payment of $1.485 million. These new 4,271,357 ordinary shares will generally be subject to a six month escrow period. At the average EOS share price for September, this values EMS at approximately $26 million.

Although fundamentally a strategic acquisition, this transaction will immediately be earnings-per-share accretive to EOS because on its existing contracts EMS will contribute a higher proportion of EOS EBIT in FY2020 than the proportion of EOS’ fully diluted shares issued as consideration.

EMS is presently achieving EBIT growth around 10% and EOS expects to accelerate this growth. EOS’ own forecast of growth exceeding 45% for the next two years will not be reduced by this acquisition.

EMS will immediately form an Australian base for EOS’ new Communication Systems business, adding to EOS’ existing Defence Systems and Space Systems business segments. The EMS senior management team of Dr Rowan Gilmore (CEO), Dr John Ness (CTO) and Mr Peter Bradley (Chief Engineer) will maintain their roles in EMS as EOS executives. EMS staff, now numbering 50, will be expanded.