Mercury Systems, Inc. has signed a definitive agreement to buy Themis Computer. The Andover, Massachusetts, company announced the deal on December 21, 2017. Themis, meanwhile, is based in Fremont, California, where it designs, builds and integrates rugged servers, computers and storage systems. Its commercial products are tuned for size, weight and power, or SWaP, and they serve U.S. and international defense programs.
Mercury will pay $180 million in cash, subject to adjustments for net working capital and net debt. It will also draw on its existing revolving credit facility to cover the price and deal costs.
Themis is growing fast, since several of its design wins are now moving into production. For the fiscal year ending December 31, 2017, it expects revenue of about $57 million, with adjusted EBITDA margins near 23%. Once the deal closes, Mercury expects it to add to adjusted EPS right away.
Mark Aslett, Mercury’s president and CEO, said the purchase fits the company’s strategy. In his view, it will strengthen Mercury in the growing C4I market, short for command, control, communications, computers and intelligence. He also sees Themis as a base for faster growth, both organic and through future acquisitions.
Themis has a large installed base. It is also designed in as the sole-source supplier of rugged rack-mounted servers for some of the largest Navy and Army server programs at the U.S. Department of Defense. Aslett said this complements Mercury’s own presence in those areas, which means the two businesses fit well. He added that Mercury can bring new tools to Themis customers, especially its security IP portfolio, as demand for secure and trusted computing grows.
Mercury lists four reasons for the deal. It gives the company a platform to push deeper into C4I. It widens Mercury’s range in rugged servers and tactical cloud computing. It also adds Navy and Army C4I programs and customers, while building on Mercury’s work in embedded security. Aslett said he looks forward to welcoming the Themis team.
The deal still has to meet the usual closing conditions, including approval under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. Mercury expects to close it in the third quarter of its fiscal 2018, which ends March 31, 2018.
Themis builds computers that hold up in harsh environments. Even so, they keep size, weight and power to a minimum for mission-critical work. Its customers come from military, aerospace, energy and rugged commercial fields. Mercury, by contrast, supplies secure sensor and safety-critical processing subsystems for many defense and intelligence programs.