HighCom develops and manufactures hard and soft armour products and high quality ballistic and personal protective gear.
All HighCom products are certified by the US Department of Justice’s National Institute of Justice, which represents the highest compliance standard in the industry.
XTEK managing director Philippe Odouard said: “This is a transformational transaction and represents a key milestone in XTEK’s evolution to becoming a leading ballistic armour player globally.
“XTEK is now in a strong position to accelerate the commercialisation of its proprietary products by combining XTclave technology and existing manufacturing capabilities with an established and growing distribution network in the largest defence market globally.
“We believe the acquisition of HighCom presents significant growth opportunities, with the potential to be the ballistic armour and personal protective equipment supplier of choice and to leverage this success and momentum into other key target markets globally.”
XTEK’s XTclave composite technology makes it possible to manufacture lighter, stronger and stiffer composite articles including ballistic plates, helmets and more.
The acquisition of HighCom supports XTEK’s strategy to commercialise its high-performance ballistic protection products, by accelerating XTclave based products’ entry into key target markets in the US.
HighCom’s existing personal protective equipment expands XTEK’s proprietary product portfolio by growing its high margin ballistic armour product range, which is expected to enhance XTEK’s earnings, cash flow and profitability.
Through the acquisition, XTEK will gain direct access to HighCom’s well established US distribution network and existing manufacturing capability necessary to address the US military market.
This allows immediate and de-risked market penetration into the US, which represents the largest and most valuable market, for XTclave products and provides the opportunity to expand the customer base and sales channels with a broader product offering.
XTEK has a well progressed XTclave pipeline with more than 15 potential clients in various validation stages, which represent final stages to significant contracts
Acquisition is value and earnings accretive
XTEK has agreed to acquire HighCom for a purchase consideration of about $3.6 million (pre future earnout payment), as outlined below:
• 4 million XTEK shares worth about $1.8 million;
• $1.8 million cash consideration;and
• Future earnout based on HighCom sales.
The acquisition of HighCom represents a transaction EV / EBITDA multiple of 2.6x CY2018 EBITDA (pre future earnout payment).
Importantly, the acquisition is expected to be immediately value and earnings accretive in FY20 (before synergies and amortisation).
XTEK has successfully completed a $2.7 million placement at an offer price of 45 cents per share.
The placement was oversubscribed, with strong demand from existing shareholders and new sophisticated investors.
Share purchase plan
XTEK is targeting to raise up to about $1 million at 45 cents per share via a share purchase plan (SPP).
The proceeds from the placement and the SPP will fund the acquisition of HighCom, expansion into the US and commercialisation of XTEK’s proprietary technologies in key markets.
Proposed timetable for the SPP