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Tactical US acquisition for cashed-up Codan

Business

Mawson Lakes company Codan will pay more than $100 million to buy US-based Domo Tactical Communications from a private equity firm.

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The technology company with business pillars in communications, mining automation and metal detector manufacture has been on a steep trajectory in the past 12 months, reporting a record profit of $64 million in August for the 2020 financial year.

The result included record sales in its communications and metal detection divisions totalling $348 million and established Codan as one of the state’s fastest-growing companies.

The DTC acquisition will strengthen the company’s position in North America and is in line with Codan’s strategic growth plan for its Tactical Communications business.

Under the deal, Codan will make an upfront payment of about $113 million ($US88 million) with the possibility of an additional payment of up to $US16 million if certain earn-out targets are achieved in calendar year 2021.

The acquisition is on a cash-free, debt-free basis and is expected to complete by 30 April 2021, subject to US and UK regulatory conditions.

In the first full year of Codan’s ownership, DTC is expected to contribute approximately $90 million in sales and $9 million profit before tax.

Codan will acquire total assets approximately equal to the purchase price with no change to its shareholder equity.

The acquisition will be fully funded from existing cash reserves.

DTC is an established technology provider for high bandwidth wireless communications with specialist capabilities to provide wireless transmission of video and other data

applications to predominantly first world customers, including Military and Special Forces, Intelligence Agencies, Border Control, First Responders and Broadcasters.

DTC is headquartered in the US, with locations in the UK and Denmark and has about 140 employees.

Codan chief executive Donald McGurk said the acquisition will allow Codan to provide total communications solutions with the addition of video and data to traditional voice-only platforms.

“This acquisition fills a technology gap and will be able to leverage Codan’s global distribution channels into the developing world,” he said.

Codan has been successfully doing business in North America for over 20 years and this acquisition represents a continuation of our growth in this strategically important region.

“DTC’s products are complementary to Codan’s Tactical Communications solutions and serve similar markets and customers. A number of key members of our Tactical Communications sales team have previously worked in the MIMO Mesh and surveillance markets, and therefore have significant experience in this industry segment”.

Headquartered in Adelaide, Codan has offices in North America, Europe, Asia, Africa, Australia and the Middle East and manufacturing operations in South Australia, Canada, the United States and Malaysia.

Its share price soared almost 10 per cent to $13.57 within a few hours of the announcement yesterday morning.

Codan’s share price was $8.15 a year ago and slumped to $3.97 in March when the coronavirus pandemic hit.

The company will release its results for the six months ending December 31 tomorrow.

Codan ranked No. 6 in InDaily’s 2020 South Australian Business Index – an annual review of the top private and public companies in the state.

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