Teledyne agrees $8bn FLIR Systems deal

March 2021 | DEALFRONT | MERGERS & ACQUISITIONS

Financier Worldwide Magazine

March 2021 Issue

Teledyne Technologies has agreed to acquire sensor and technology company FLIR Systems in a cash and stock transaction worth nearly $8bn.

The deal is expected to close in the middle of 2021, subject to the receipt of required regulatory approval and the approval of the board of directors of both companies.

Under the terms of the agreement, FLIR stockholders will receive $28 per share in cash and 0.0718 shares of Teledyne common stock for each FLIR share held. The transaction reflects a 40 percent premium for FLIR stockholders based on FLIR’s 30-day volume weighted average price as of 31 December 2020.

Teledyne has arranged a $4.5bn 364-day credit commitment to fund the transaction and refinance certain existing debt. Teledyne expects to fund the transaction with permanent financing prior to closing. Net leverage at closing is expected to be approximately four times adjusted pro forma earnings before interest, taxes, depreciation and amortisation (EBITDA) with leverage declining to less than three times adjusted pro forma earnings.

“At the core of both our companies is proprietary sensor technologies,” said Robert Mehrabian, executive chairman of Teledyne. “Our business models are also similar: we each provide sensors, cameras and sensor systems to our customers. However, our technologies and products are uniquely complementary with minimal overlap, having imaging sensors based on different semiconductor technologies for different wavelengths. For two decades, Teledyne has demonstrated its ability to compound earnings and cash flow consistently and predictably. Together with FLIR and an optimised capital structure, I am confident we shall continue delivering superior returns to our stockholders.”

“FLIR’s commitment to innovation spanning multiple sensing technologies has allowed our company to grow into the multi-billion-dollar company it is today,” said Earl Lewis, chairman of FLIR. “With our new partner’s platform of complementary technologies, we will be able to continue this trajectory, providing our employees, customers and stockholders even more exciting momentum for growth. Our Board fully supports this transaction, which delivers immediate value and the opportunity to participate in the upside potential of the combined company.”

“We could not be more excited to join forces with Teledyne through this value-creating transaction,” said Jim Cannon, president and chief executive of FLIR. “Together, we will offer a uniquely complementary end-to-end portfolio of sensory technologies for all key domains and applications across a well-balanced, global customer base. We are pleased to be partnering with an organisation that shares our focus on continuous innovation and operational excellence, and we look forward to working closely with the Teledyne team as we bring our two companies together to capitalise on the important opportunities ahead.”

Teledyne is a provider of instrumentation, digital imaging products and software, aerospace and defence electronics, and engineered systems. FLIR focuses on intelligent sensing for defence and industrial applications. Teledyne electro-optical products are used in the Boeing Space Launch System for NASA. FLIR and Teledyne provide components for the Lockheed Martin F-35 joint strike fighter.

Teledyne expects the acquisition to be immediately accretive to earnings, excluding transaction costs and intangible asset amortisation, and accretive to generally accepted accounting principles (GAAP) earnings in the first full calendar year following the acquisition. FLIR reported full-year revenue of $1.9bn in 2019 and expects 2020 revenue between $1.8bn and $1.9bn.

The COVID-19 pandemic has been a boon for FLIR. Amid the economic downturn, in August the company reported high demand for its thermal imaging cameras used to detect elevated body temperature. Its thermal imaging tech was also used to help assess wildfires in the US during summer 2020.

The deal is not expected to attract the ire of competition regulators as the products produced by both companies have minimal overlap.

Richard Summerfield