Ultra Electronics Holdings PLC (LON:ULE) is to buy NYSE-listed Sparton Corp (NYSE:SPA) for US$23.50 per share in cash, valuing the US company at US$234.8mln.
The deal strengthens the UK defence contractor’s links with the US Navy and allows FTSE 250-listed Ultra to secure an important revenue and earnings stream.
Sparton's Engineered Components & Products (ECP) division is Ultra's 50/50 partner in the long-standing ERAPSCO joint venture, which manufactures underwater sensors used to track and detect submarines.
Ultra said it intends to sell Sparton's other business, the Manufacturing & Design Services division by the end of Q1 2018 and is in advanced discussions with several interested parties.
It said Sparton's ECP division “is an excellent strategic fit with Ultra's existing activities in a market segment in which the Group has extensive experience and well established customers.”
Ultra Electronics said it will raise capital to partly fund the deal by placing around 9.9% of its shares under issue at 1,950p per share. The remaining part of the purchase will be funded through a drawdown on the firm's existing bank facilities.
"The unified management structure and increased focus are expected, over time, to bring benefits beyond those that we have been able to achieve through the JV," Rakesh Sharma, Chief Executive of Ultra said.
The UK company will need the backing of the US government for the takeover.
In mid-morning trading Ultra Electronics was down 13p at 1,978p per share.