THROUGH AN AGREEMENT WITH M/A-COM, Cobham plc will purchase M/A-COM's radio-frequency components and subsystems businessone of the largest original-equipment manufacturers (OEMs) of microwave subsystems in the worldfrom Tyco Electronics for US $425 million in cash. That price will total an effective US $380 million after an allowable tax expense relating to good-will amortization. This transaction represents another step forward in Cobham's growth strategy.
M/A-COM's Aerospace & Defense (A&D) business, which comprises a little less than 40 percent of revenue, is complementary to Cobham's existing defense-electronic-systems business. It is expected to bring accelerated development of products with enhanced capabilities together with additional subsystem capability and strong customer relationships. The transaction will provide an immediate resolution for the long-term future for the aerospace and defense business. Cobham plans to divest the commercial business because it is not core to the group's strategy.
A key element of Cobham's strategy is growth through acquisition to reinforce its existing strengths, key technologies, and market positions. The company aims to become a global Tier-2 subsystem supplier of integrated RF front ends for radar and electronicwarfare systems. The acquisition of M/A-COM is a significant step forward in the execution of this strategic objective. The A&D business is complementary to the existing Cobham Defence Electronic Systems (CDES) business, bringing additional microwave technical expertise, new subsystems, products, and customer relationships.
Cobham intends to accelerate the internal research and development investment in the business to become a complete aerospace-and-defense RF and microwave electronic designer and manufacturer. Consequently, it is anticipated that the A&D business will grow in line with the rest of CDES after 2009. It will be operated under an existing Special Security Agreement with the US Department of Defense.
The commercial activities of M/ACOM will be run outside of Cobham's operating divisions as non-core and will be held as an asset for resale. The acquisition of M/A-COM is expected to be completed in the second half of 2008 and is subject to customary regulatory approval.