WASHINGTON — Satellite connectivity provider Speedcast of Australia is buying UltiSat, a U.S. satellite network operator whose teleport is in Denmark, for at least $65 million, Speedcast announced Sunday night.
Depending on the 2017 and 2018 financial performance of Gaithersburg, Maryland-based UltiSat, Speedcast said it would pay additional earn-out considerations of $20 million and $15 million cash for a maximum price of $100 million.
Speedcast intends to use UltiSat — the company’s 15th acquisition since spinning off from AsiaSat in 2012 — to crack into the U.S. government market, which forms a large chunk of the overall government market that Speedcast estimates will be worth $9 billion by 2025.
A Fourth Pillar
In a presentation submitted to the Australian Securities Exchange, Speedcast described the UltiSat acquisition as the “creation of a fourth pillar of growth” from the government market, following maritime, energy, and enterprise and emerging markets.
UltiSat’s U.S. government customers include the Defense Information Systems Agency, the Federal Emergency Management Agency, the Army and others. The company provides services in over 130 countries, and in May secured a C- and Ku-band capacity contract with the Swedish Defense Materiel Administration.
Additionally, UltiSat serves several nongovernmental organizations including the United Nations Human Rights Council, the UN Development Program and NetHope.
Speedcast estimates generating more than $100 million in global government revenues when combining its existing government business with UltiSat. The company generated $59.5 million in 2016, up from $41.9 million in 2015.
SpeedCast said UltiSat expects $78.5 million in 2017 revenue, growing revenue by 30 percent and EBITDA, or earnings before interest, taxes, depreciation and amortization, by 40 percent pre-merger synergies.
“The acquisition of UltiSat extends Speedcast’s position serving government and [non-governmental organization] customers, at a time when we expect government spending to rise,” Speedcast CEO Pierre-Jean Beylier said in a July 23 statement. “UltiSat has built a really strong reputation providing remote communications and professional services to key customers, such as the U.S. government and [intergovernmental organizations].”
In the company’s presentation, Speedcast said it is targeting $200 million in government revenues in five years time.
Integration process and savings
Speedcast said the company has “conservatively estimated” saving $3 million from consolidating UltiSat’s satellite capacity, teleport infrastructure and corporate support functions. The company expects the first $1.5 million to occur within 12 months of the transaction’s close, which is anticipated by year’s end.
Speedcast said its record of previous acquisitions gives strength to these expectations. The integration of Harris CapRock, which Speedcast purchased in November for $425 million, is proceeding on schedule, with the expectation that the synergy benefits “will be in excess of those previously announced.” Speedcast had forecasted $24 million in annual cost savings over the 24 months post-acquisition for Harris CapRock, and $15 million within the first year. Speedcast anticipates completing the integration of Harris CapRock by year’s end.