GeoEye To Acquire 100 Percent of Spadac for $46M

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DARMSTADT, Germany — Earth imagery provider GeoEye on Dec. 8 said it has agreed to purchase 100 percent of geospatial services company Spadac for $46 million in cash and stock in a transaction GeoEye hopes will expand its customer portfolio in defense and intelligence markets.

McLean, Va.-based Spadac, in which GeoEye has held a minority stake since 2007, is expected to report about $27 million in revenue for 2010, the two companies said in a statement.

“By combining our imagery collection capabilities with Spadac’s location-based analytic solutions, we can help our customers gain unprecedented insight about the areas of the world in which they operate,” GeoEye Chief Executive Matthew O’Connell said.

In a Dec. 8 conference call with investors, GeoEye Chief Financial Officer Joseph F. Greeves said Spadac’s revenue is expected to grow by 30 percent in 2011, and that the company will be adding 30 people to its current work force of 150 to accommodate the new business.

Greeves said Spadac’s gross profit margins are lower than GeoEye’s 15 percent compared with GeoEye’s 50 percent EBITDA — earnings before interest, taxes, depreciation and amortization — margin, meaning that the acquisition will dilute GeoEye’s margins.

The companies said the transaction is expected to close by the end of December, at which time Spadac will be renamed GeoEye Analytics and be operated as a wholly owned division of Dulles, Va.-based GeoEye. GeoEye said Spadac’s expertise would be especially useful to customers when combined with GeoEye’s Web-based EyeQ service.

Of the $46 million purchase price, $34.5 million will be paid in cash, $9 million in GeoEye common stock and $2.5 million in converted equity resulting from GeoEye’s earlier ownership stake in Spadac, the companies said. GeoEye had paid $1 million for its Spadac equity, and that investment is now valued at $2.5 million.

Some 90 percent of Spadac’s customer base is within the U.S. government, including the defense, intelligence and homeland security agencies. O’Connell said Spadac has 40 U.S. government customers that GeoEye does not have and that these customers will be introduced to GeoEye, especially by a combined offer of GeoEye’s EyeQ service and Spadac’s data-mining expertise.

GeoEye Chief Technology Officer Brian O’Toole said during the call that Spadac has seven patents, and three more pending, that cover the company’s way of collating publicly available data to discern patterns of behavior.

O’Connell said one example of what Spadac does is to determine the likelihood of violent crime in certain areas by mining data on past criminal activity, demographics, traffic patterns and other information that, when put together, can predict where crime is likely to occur.

O’Connell said Spadac employees — all of whom will be retained by GeoEye — are often embedded with defense or intelligence customers that do not necessarily know about the EyeQ service.

O’Toole said most of what Spadac does is not based on satellite imagery.