Optic Systems (ASX:EOS) has entered into a binding share sale agreement to sell its Naval Satellite Communications subsidiary EM Solutions to AIM-listed Cohort (LSE:CHRT) for $144 million.
EM Solutions, based in Brisbane was acquired by Optic Systems in 2019 in a scrip-based transaction which valued EM Solutions at approximately $26 million.
The 2019 acquisition was intended to support the Optic Systems SpaceLink venture which was terminated in 2022. The company says while an attractive, growing, and profitable business, EM Solutions has become non-core to its current growth strategy.
Optic Systems says the proposed sale, which has Foreign Investment Review Board (FIRB) approval, demonstrates strategic and capital allocation discipline.
Completion of the deal is expected within six months.
Net proceeds from the non-core divestiture will be used to support growth in core business areas, including in the counter-drone market.
The transaction aligns with Optic Systems’ transformation strategy to focus on commercialising its substantial intellectual property and growing its core product offerings in the areas of remote weapon systems, high energy laser weapons, and space control.
These sectors require minerals such as rare earths, particularly yttrium and terbium, among others.
In particular, Optic Systems sees a compelling growth opportunity in the counter-drone market for both remote weapon systems and high energy laser weapons.
Optic Systems CEO Andreas Schwer says the company had strong interest from the market in the EM Solutions business, and by releasing capital at this time, the company is very well placed to execute its growth strategy.
Completion of the transaction will automatically trigger the repayment of a $64.4 million outstanding debt facility with Washington H. Soul Pattinson and Company in full, which would otherwise have repaid from organic cashflows upon maturity in October 2025.
EM Solutions designs, builds, deploys and maintains on-the-move satellite communication equipment systems for defence forces. It has operated predominantly as a stand-alone business.
Cohort is a UK-based company that supports entrepreneurial businesses to grow and innovate in defence technology, products and services. It is the parent company of six businesses that provide technology-based services and products for international defence and security customers in government and industry.
Write to Adam Orlando at Mining.com.au
Images: Optic Systems
