XML 47 R24.htm IDEA: XBRL DOCUMENT v3.3.1.900
Subsequent Events
3 Months Ended
Oct. 31, 2015
Subsequent Events [Abstract]  
Subsequent Events
Subsequent Events

On November 22, 2015, we signed a definitive merger agreement to acquire TCS, a leading provider of mission-critical Command, Control, Communications, Computers, Intelligence, Surveillance and Reconnaissance (“C4ISR”) solutions and next generation emergency 911 services to leading cellular and VoIP providers.

Under the terms of the merger agreement, we agreed to make a first step cash tender offer for all outstanding shares of TCS common stock for a price of $5.00 per TCS share (which we did on December 7, 2015). Once the first step cash tender is completed, it will be followed by a merger of TCS with a newly-formed wholly-owned subsidiary of Comtech pursuant to which any TCS common stock not previously tendered will be acquired for $5.00 per share. During the twelve months ended September 30, 2015, TCS reported revenue of $364,100,000 with GAAP operating income of $16,100,000. As of September 30, 2015, TCS had approximately $51,600,000 of cash, cash equivalents and marketable securities and debt of approximately $143,600,000 (which is anticipated to be repaid upon the closing of the transaction). The acquisition has a transaction equity value of approximately $339,700,000 and an enterprise value of approximately $430,800,000.

We expect to fund the acquisition by redeploying approximately $149,900,000 of both our and TCS' cash, cash equivalents and marketable securities with the remaining funds coming from a $400,000,000 TCS Acquisition Related Credit Facility (see Note (9) - "Credit Facility").

We also expect to incur transaction related expenses including certain change-in-control payments, professional fees for financial and legal advisors and debt extinguishment costs. We preliminarily estimate that these expenses will approximate $27,500,000, some of which are expected to be immediately expensed upon closing, some expensed during the first year following the closing and some capitalized in accordance with purchase accounting rules. Pursuant to accounting rules, the acquisition is expected to result in a material increase in annual amortization expense related to intangibles and possible other fair value adjustments.

After considering the anticipated payment of estimated transaction costs and fees of $27,500,000, we estimate that we will have approximately $52,700,000 of cash at closing (including cash acquired as result of the TCS acquisition).

The transaction is subject to customary closing conditions, including the tender of at least a majority of outstanding shares of TCS common stock and expiration of the applicable waiting period under the Hart-Scott Rodino Antitrust Improvements Act of 1976, and the transaction is expected to close no later than March 2016.