Image source: Aviat Networks
Aviation Networks ( AVNW) announced on Thursday that it would acquire Redline Communications (Toronto: RDL) for a cash transaction worth approximately C $ 16.2 million ($ 12.9 million), or C $ 0.90 per common share.
Toronto-based Redline is building wide area wireless networks for oil and gas companies, mining companies and other critical applications in challenging locations.
Aviat is a global provider of wireless transportation products and services for 5G, rural broadband and private networks. The company, based in Austin, Texas, is a leading provider of broadband in rural areas in the United States.
“This acquisition expands Aviat’s share of private networks by adding Redline wireless network access capabilities in industrial PTP / PTMP and licensed private LTE and 5G to Aviat’s existing wireless transportation solutions,” said Aviat CEO Pete Smith.
“Redline products will use Aviat’s sales and marketing for wider coverage. Aviat will also benefit from Redline’s presence in the oil and gas and transportation verticals.”
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While this is only a small acquisition, we are seeing immediate benefits for Aviat. Redline is offering Aviat a seamless entry into the $ 8 billion private LTE / 5G address market, and the deal should become active for Aviat in its first year.
Investment dissertation
Shares of Aviat rose 11% on Thursday after the news, closing at $ 34.06, a level not seen since October 2021.
Even after a sharp one-day rally, Aviat’s market capitalization is a modest $ 381 million, which looks easy given the company’s market position and growth prospects.
- The markets for 5G, critical communications, rural broadband and emerging economies are huge.
- After this acquisition add a private LTE / 5G market.
- The company is a leading provider of rural broadband in the US with a market share of 38%.
- Aviat offers wireless vehicles with the highest power in the industry and the highest power with the lowest total cost of ownership.
- Highly cost-effective SaaS model, including industry-unique microwave noise monitoring software.
- 42 million Americans still do not have access to high-speed Internet.
- The historic NOL of $ 530 million reduces the Aviat tax rate from the statutory 24% to the effective 4%.
- NOL is expected to save at least $ 6 million in cash taxes in fiscal year 2022 and for at least another five years.
- The company expects the acquisition of Redline to help increase gross profit, adjusted EBITDA and free cash flow in the first year.
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Source: Stock news
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