-- adds detail, share price, broker comment --
Seeing Machines (LON:SEE) has agreed to transfer the bulk of its DSS off-road fatigue monitoring business to US giant Caterpillar.
The two companies have been working together since 2013, but with this new agreement Caterpillar will take full responsibility for the manufacturing, marketing and sales of DSS. The DSS system monitors the tiredness levels of drivers of off-road vehicles such as mining and construction trucks. Caterpillar will pay Seeing Machines US$17.5mln over four years as well as royalty fees for DSS hardware, and share of subscription fees for software licensing, monitoring and analytics services. In return, it will receive an exclusive licence for off-road DSS, which will now be sold through CAT dealers globally. Existing agreements will be taken on by Caterpillar. The two companies will collaborate on new product development while Caterpillar will also have distribution rights for Seeing Machines' Fleet product. Ken Kroeger, Seeing Machines’ chief executive, described it as a ‘pivotal moment’ in the company’s history. “Caterpillar is capable of maximising the return on the DSS technology; their reputation, reach, capability and commitment will deliver great outcomes for both companies." Kroeger told Proactive that Seeing Machines would earn higher margins than currently, while the ruggedised off-road sector was the smallest of the markets it is targeting. The cash and royalty will also to focus on the use of its face monitoring technology its areas such as fleet management, cars and aviation. As part of the deal, Seeing Machines will also continue to work with Caterpillar subsidiary, Electro Motive Diesel on the use of DSS in rail locomotive cabs. House broker finnCap added the agreement was a significant acceleration of the joint venture between the two companies.
The deal radically improves the profitability of the original DSS business and highlights the huge potential ahead. The current target price is 12p. Shares rose 5% to 4.73p.