Acquisitions

12 Months Ended

Jun. 30, 2023

Business Combination and Asset Acquisition [Abstract]

Acquisitions

Acquisitions

NEC’s Wireless Transport Business

On May 9, 2023, the Company entered into a Master Sale of Business Agreement (the “Purchase Agreement”), with NEC Corporation. Pursuant to the Purchase Agreement, the Company will purchase certain assets and liabilities from NEC relating to NEC’s wireless backhaul business (the “NEC Transaction”). Initial consideration due at the closing of the NEC Transaction will be comprised of (i) an amount in cash equal to $45.0 million, subject to certain post-closing adjustments, and (ii) the issuance of $25 million in Company common stock. Aggregate consideration will be approximately $70 million. The Company has obtained permanent financing to fund the cash portion of the NEC Transaction. See Note 7. Credit Facility and Debt for further information.

The Purchase Agreement contains certain customary termination rights, including, among others, (i) the right of the Company or NEC to terminate if all the conditions to closing have not been either waived or satisfied on or before February 9, 2024 and (ii) there is a final non-appealable order of a government entity prohibiting the consummation of the NEC Transaction. The NEC Transaction remains subject to, among other things, regulatory approvals and satisfaction of other customary closing conditions.

The Company expects to complete the NEC Transaction in the fourth quarter of calendar year 2023.

NEC is a leader in wireless backhaul networks with an extensive installed base of their Pasolink series products.

Redline Communications Group Inc.

On July 5, 2022, the Company acquired all of the issued and outstanding shares of Redline Communications Group Inc. (“Redline”), for a purchase price of $20.4 million. Redline is a leading provider of mission-critical data infrastructure. Acquiring Redline allows Aviat to expand its Private Networks Offering with Private LTE/5G and Unlicensed Wireless Access Solutions, by creating an integrated end-to-end offering for wireless access and transport in the Private Networks segment, leveraging Aviat's sales channel to address a large dollar Private LTE/5G addressable market and increasing Aviat’s reach in mission-critical industrial Private Networks.

Cash acquired as part of the all-cash acquisition was $4.6 million for total net consideration of $15.8 million. The acquisition was accounted for as a business combination using the acquisition method of accounting. The assets acquired and the liabilities assumed have been recorded at their respective fair values as of the acquisition date. The recognized goodwill is attributable to the workforce of the acquired business and expected synergies. The goodwill from this acquisition is expected to be deductible for tax purposes. Transaction costs related to the acquisition were expensed as incurred and are included in selling and administrative expenses in the consolidated statements of operations.

The preliminary purchase price allocation has been updated for certain measurement period adjustments based on the final valuation resulting in a $2.5 million increase in identifiable finite-lived intangible assets and a $2.6 million decrease in net tangible assets acquired. These adjustments resulted in corresponding increase to goodwill.

The results of operations of Redline have been included in our consolidated financial statements since the date of acquisition. The Company determined that the impact of this acquisition was not material to our consolidated financial statements; therefore, revenue and earnings since the acquisition date and pro forma information are not required or presented.

A summary of the final purchase price allocation is as follows:

(In thousands)
Cash and cash equivalents	$	4,642
Accounts receivable, net	4,281
Inventories	3,379
Property, plant and equipment, net	688
Identifiable finite-lived intangible assets:
Patents	690
Customer relationships	7,730
Trade names	1,330
Other assets	1,921
Accounts payable	(2,113)
Advance payments and unearned revenue	(3,301)
Other liabilities	(3,948)
Goodwill	5,112
Total consideration	$	20,411

The following table presents details of the acquired identifiable finite-lived intangible assets:

	Useful life in Years	Gross		Accumulated amortization		Net
Identifiable intangible assets:
Patents	10	$	690	$	(69)	$	621
Customer relationships	14	7,730		(552)		7,178
Trade names	16	1,330		(83)		1,247
Total identifiable intangible assets		$	9,750	$	(704)	$	9,046

Amortization of finite-lived intangibles is included in selling and administrative expenses. As of June 30, 2023, the estimated future amortization expense of intangible assets with finite lives is as follows:

	Amount
	(In thousands)
2024	$	704
2025	704
2026	704
2027	704
2028	704
Thereafter	5,526
Total	$	9,046