AS&E's Deal With OSI Systems Investigated By Law Firms
Zacks Investment Research | Jun 26, 2016 09:47PM ET
Last Tuesday, American Science & Engineering Inc. (“AS&E”) (NASDAQ:ASEI) announced a definitive agreement with OSI Systems, Inc. (NASDAQ:OSIS) wherein the latter agreed to acquire AS&E for about $269 million in cash. Per the transaction, OSI Systems will pay $37.00 per share in cash, which represents a premium of about 25% over the recent 90-day average price, according to AS&E.
The deal, although quite synergistic at first glance, has attracted major attention from securities law firms who believe that the deal does not represent the best possible value for AS&E shareholders.
Let’s analyze the drivers and details of the deal.
Rationale for Deal
AS&E is a leading provider of detection solutions like X-ray technology for the inspection of cargo, packages and personnel. The company was enjoying impressive operational momentum half a decade back, driven by the U.S. military presence in Iraq and Afghanistan.
However, post the withdrawal of the U.S. troops, the company’s business deteriorated radically. For the fiscal year ended Mar 2016, sales fell 19% year over year, with the company posting an operating loss of $5.3 million.
These trends, coupled with strained external growth factors, might have been a key driver for the merger deal. However, the company does have a strong commercial business, and a proliferation of terrorist attacks and threats continues to drive growth in some key products of the company.
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