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Comtech Deal to Acquire CPI Ends

In July we wrote about the U.S. Army awarding its next increment of the Blue Force Tracking (BFT) contract to ViaSat. One of the losing contenders was Comtech Telecommunications (CMTL).

BFT is a system of terminals, radios and datalinks that allow units to track the position of other friendly units. The goal of the system is to avoid friendly fire incidents that proved such an issue in Desert Storm. Northrop Grumman (NOC) is the prime contractor for BFT with ViaSat winning a contract to build parts of the system.

The loss of the contest for this contract was a major blow for Comtech and its stock price suffered accordingly. This then put pressure on the planned acquisition of CPI International for over $470 million. This deal was heavily based on CPI International shareholders receiving Comtech stock. The fall in price of shares affected how much money would be transferred.

Now in part due to the loss of the BFT contract Comtech announced that the deal has been terminated by mutual agreement.

At a time when M&A within the defense industry is supposed to pick up this illustrates that not all deals will go through. Comtech certainly had good reason to acquire CPI as it would have increased their market share in a variety of products and also expand their customer base. Unfortunately the two companies could not negotiate a deal based on the current status of Comtech’s stock.

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