A complex three-way deal to acquire SenDEC Corp., if completed, will bring a Florida investment firm more than $100 million in stock and promises multimillion-dollar payouts to the Perinton firm's shareholders and executives.
On Monday, API Technologies Corp. said it had signed a definitive merger agreement with Vintage Capital Management LLC to acquire SenDEC. The deal was conceived by the investment company.
Under the terms of the deal, API will acquire 100 percent of the equity of SenDEC, which will include SenDEC's electronics manufacturing operations in Perinton and roughly $30 million in cash, in exchange for the issuance of 22 million API common shares to an affiliate of Vintage.
The share price of $5.70 at midweek makes those shares worth roughly $125 million. Officials expect the deal to close this month. The price being paid for SenDEC has not been disclosed.
As part of the proposed deal, certain SenDEC employees will be eligible for a management bonus of up to $11 million, potentially payable in three installments through July 31, 2013, based on achievement of certain financial milestones of SenDEC, a filing with the Securities and Exchange Commission shows.
The deal calls for API to pay former SenDEC shareholders up to $14 million in earn-out payments, potentially payable in three installments through July 31, 2013, based on SenDEC's achievement of certain financial milestones, SEC filings show.
Bringing SenDEC and API together was conceived by Vintage Capital, which was familiar with both companies, said Andrew Laurence, a partner with Florida-based Vintage Capital.
Vintage was introduced to SenDEC by an investment banker, and Brian Kahn, Vintage Capital managing partner, was familiar with API Technologies as a result of his prior working relationship with API executives, Laurence said.
Vintage had no prior connection to SenDEC, the local company said.
SenDEC generated approximately $90 million in revenue and more than $3.5 million in net income during its last fiscal year, which ended July 31. The firm has roughly 200 workers, up from roughly 150 in 2009.
SenDEC's merger with API doubles the size of API and presents a variety of growth opportunities in the defense sector, API management said. Once the transaction closes, the company plans to pursue a listing on Nasdaq. Its stock currently trades over the counter.
API intends to pay down its existing debt with the $30 million in cash acquired in the deal and emerge with net cash on its balance sheet, the firm said.
API has nearly 600 workers. The firm logged sales of some $68 million in its most recent fiscal year, which ended May 31, and reported an annual net loss of $9 million, SEC filings show.
With shares of API (ATNYD.OB) trading at midweek at $5.70, the stock is near the high end of its 52-week range of $3.32 to $6.96.
The proposed new owners of SenDEC plan no changes in the firm's local business operations. All SenDEC employees have been offered jobs with the company, and the management team will remain intact, Laurence said.
"The only difference is that because SenDEC is now part of a larger defense and electronics company, SenDEC's customers will now have access to a broader range of services," Laurence said.
API, based in Ronkonkoma, Suffolk County, supplies engineered products, components and subsystems to manufacturers, government contractors, international government and military organizations and Fortune 500 companies.
Michael Fiske, vice president of sales and marketing for SenDEC's contract electronics manufacturing group, said the company is providing information to its shareholders about the deal and a vote is forthcoming.
The deal is contingent upon SenDEC first being acquired by Vintage-and that transaction must be approved by two-thirds of the outstanding common shares of SenDEC.
If approved, SenDEC will merge with API Technologies, with Vintage Capital being the primary shareholder. Vintage Capital's Kahn will serve as chairman and CEO of API Technologies, while Kenton Fiske will continue to serve as SenDEC's CEO. Fiske will also serve on its API's board.
API and SenDEC will operate independently but will collaborate where it makes sense, Michael Fiske said.
The impact on local operations is expected to be minimal, as Vintage Capital and API were attracted to SenDEC for how the firm currently operates, he said.
"Our facilities, our people, our equipment and our customers are all staying," Fiske said. "We have been encouraged to 'continue doing what (we) have been doing' and to support our customers in all the markets SenDEC serves today."
Fiske said the company will need to spin off SenDEC's Products Group into a separate legal entity that will not be part of the merger, but he added that the business has been acting as an independent unit of SenDEC for years with its own employees.
There are 24 workers in the Products Group, which will continue to be owned by the SenDEC shareholders and will not be part of the proposed merger.
The SenDEC Products Group manufactures its own family of digital monitoring, display and control devices that include solid-state electronic hour meters, tachometers and engine monitors. These are marketed under the SenDEC name, supplied under private labels to original equipment manufacturers and sourced globally through the company's distributor network.
SenDEC ranked among the nation's fastest-growing private firms in 2009 and was No. 1 on the 2010 Rochester Business Alliance Inc. Top 100 list of fastest-growing private companies.
The firm provides contract electronics manufacturing and design engineering services for the commercial-industrial, consumer, medical, military and telecommunication markets. Its clients range from startups to Fortune 100 corporations.
In addition to assembling printed circuit boards, SenDEC provides designs for manufacturability, resulting in lower production costs, and offers assembly and prototype and test services, officials said.
The company originated in 1972 but was incorporated in 1976 by Kenton Fiske, a former Xerox Corp. engineer, and partners Edward Reehil and Joseph Holroyd.
Vintage Capital is a private equity investment firm specializing in the defense, manufacturing and consumer sectors. The firm, created in 1998 as Kahn Capital Management, identifies, analyzes and invests in lower-middle market companies, the firm states on its website.
Its portfolio includes Maryland-based Integral Systems Inc., which provides secure management, delivery and distribution of data and information from space and terrestrial-based platforms into networks for military, government and commercial satellite and aerospace customers. Vintage Capital also has stakes in rent-to-own furniture stores and contract manufacturing companies.
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