Elbit Systems Ltd. (ESLT, Financial) has revealed its decision to buy NICE-Systems Limited's (NICE, Financial) cyber and intelligence unit in a deal worth $157.9 million. The company has decided to go ahead with this move so as to gain a greater share in the market that is growing rapidly. Bezhalel Machlis, CEO of Elbit, said that he considers this move as significant strategy to compete with global leaders. Shares of NICE-Systems saw a fall of 0.8% after the declaration of the news. Elbit shares rose 1%.
Deal details
According to the terms of the agreement, Elbit will give $117.9 million in cash at the closing of the deal. $40 million will be given to NICE as earn-out, based on how the activities of the acquired unit earn profit in future. Therefore, the total consideration of the deal is valued at $157.9 million. The cyber and intelligent unit which is to be acquired will be in the hands of CYBERBIT. CYBERBIT is the subsidiary of Elbit that was mainly set up to ensure that Elbit's cyber intelligence and security actions are under one roof. The Executive Vice President of Elbit Systems, Mr. Adi Dar, will be the general manager of Cyberbit. All employees under the NICE's Cyber and Intelligence will now become future employees of Cyberbit. The deal is expected to end in the early third quarter this year.
It seems that both the companies are happy with the progress of the deal. NICE can now put greater focus on their business model as well as their core markets. Mr. Machlis of Elbit is pleased as well as he is sure that the deal will help in providing their customers with “end-to-end, market leading cyber solutions.” He was also quoted saying, "We welcome NICE’s Cyber and Intelligence division employees, known for their cutting edge technological capabilities and operational experience. I believe that our combined technology synergetic forces, backed by on-going investment in the cyber field and the joint market position will lead CYBERBIT to success and a world leading position.”
The Cyber and Intelligence division of NICE bought about $80 million revenue for the full year 2014. This constituted around 8% of NICE's total yearly revenue. The unit provides tools to create communication intelligence to law enforcement agencies and intelligence organizations. BCEO of NICE, Barak Eilam said that the company will continue in its efforts to execute their long-term plan. NICE will now “focus on synergetic,core businesses,” he said. Speaking about Elbit Systems, the company was founded in 1966 and is an Israel-based defense electronics company. Elbit focuses on the development of new technologies for defense, commercial aviation and homeland security. The Haifa-based company also undertakes the up-gradation of existing military platforms.
Investor impact
Prior to the deal, NICE expected total non-GAAP revenue to be in the range $249 to $257 million for the second quarter. After the deal was declared, the company changed its guidance of non-GAAP total revenue to be between $229 to $237 million. Previous non-GAAP EPS was expected to be 67-73 cents per share. Now, the revised non-GAAP EPS for the second quarter is expected to between 64 to 70 cents per share. Prior projection of non-GAAP revenue for full-year 2015 was $1.065 to $1.085 billion. Now, the estimated full-year total revenue on a non-GAAP basis is expected to be $985 million to $1.005 billion. Adjusted EPS for the full year 2015 is now estimated to be $3.01 to $3.12 from the prior $3.10 to $3.21.
Elbit Systems shares saw a high of $76.8751 on trading day Wednesday and a low of $76.02. The previous day close was $75.64. Ella Fried, a financial analyst at Leumi Capital Markets said that cyber profits tend to attract a great amount of profit. Though she admitted that the company will face a lot of challenges, the company has great scope in developing in the ever-growing market.
