Electro Optic Systems Holdings Limited (ASX: EOS) has entered a binding agreement to sell its Naval Satellite Communications subsidiary, EM Solutions, to UK-based Cohort plc. The deal values EM Solutions at $144 million, marking a significant move for EOS as it sharpens its focus on core growth areas like counter-drone systems, high-energy laser weapons, and remote weapon systems.
Key Highlights of the Transaction:
- Buyer: Cohort plc, an AIM-listed UK defence technology company.
- Enterprise Value: $144 million, subject to customary adjustments.
- Approval Status: FIRB approval received; completion expected within six months.
- Proceeds Utilization: To repay $64.4 million debt to Washington H. Soul Pattinson and strengthen EOS’ balance sheet for future growth.
Strategic Rationale:
This divestment underscores EOS’ focus on commercializing intellectual property and expanding in high-growth markets. While EM Solutions has been a profitable, stand-alone business, it no longer aligns with EOS’ strategic priorities.
According to EOS CEO Andreas Schwer, the sale positions EOS to fully capitalize on its counter-drone market ambitions, with Cohort deemed an ideal owner to propel EM Solutions’ growth under the AUKUS partnership framework.
About EM Solutions:
- Acquired by EOS in 2019 for ~$26 million.
- Designs and deploys on-the-move satellite communication systems primarily for defence forces.
- EM Solutions became non-core to EOS after the termination of the SpaceLink venture in 2022.
Financial Impact:
- The transaction will trigger full repayment of EOS’ outstanding $64.4 million debt, leaving the company debt-free.
- Capital gains tax from the sale is expected to be largely offset by existing tax losses.
- Strengthened financial position to support investments in growth areas like counter-drone systems and laser weapons.
Buyer Profile: Cohort plc
Cohort specializes in defence and security technology and operates six entrepreneurial businesses focused on international markets. This acquisition complements Cohort’s portfolio and reinforces its strategic foothold in the defence technology sector.
Outlook:
The deal is expected to complete within six months, pending routine approvals and non-occurrence of material adverse changes. EOS remains committed to leveraging its strengthened balance sheet for disciplined growth in high-energy defence technologies.
