COMTECH TELECOMMUNICATIONS CORP. and CPI International, Inc. jointly announced the signing of a definitive merger agreement under which Comtech will purchase CPI in a cash and stock transaction with an enterprise value of approximately $472.3 million. Comtech will fund the acquisition by redeploying approximately $372.0 million of its existing cash. It also will issue approximately 4.4 million shares of Comtech common stock. CPI's sales and earnings before interest, income taxes, depreciation, and amortization (EBITDA) were $338.5 million and $56.4 million, respectively, for its last four fiscal quarters ended Jan. 1, 2010.

Some key strategic benefits for Comtech include almost tripling the size of Comtech's RF and microwave amplifier segment, which is anticipated to generate more than $50.0 million of EBITDA on an annual basis. Comtech will be established as a global supplier of vacuum electron devices (including klystron, traveling wave, and power grid tubes). By combining the manufacturing, engineering, and sales teams for Comtech's XICOM-branded product group with CPI's satcom product group, the firms are planning to deliver new and advanced amplifiers and other products that will be used in satellite communications, radar applications, and other electronic-warfare systems.

Of CPI's sales of $338.5 million for its last four fiscal quarters ended Jan. 1, 2010, approximately 40 percent are derived from annuity-like sales for replacements, spares, and repairs. This percentage includes upgraded replacements for existing sole-sourced products. Such sales have strong related cash flows, which should allow Comtech to become a more stable, predictable business that is partially insulated from dramatic shifts in market conditions.

Fred Kornberg, Comtech President and CEO, and Joe Caldarelli, CPI CEO, jointly state, "We intend to thoughtfully and actively address our customers' needs as we integrate our complementary and diverse product lines. We plan no interruptions in any scheduled or committed rollouts from either company, and we intend to continue to support all existing Comtech and CPI products and services. We anticipate honoring all existing agreements with customers, VARs, distributors, OEMs, and other strategic partners."