MilDef acquires Handheld Group to expand US operations

MilDef has entered into an agreement to acquire all shares in the company Handheld Group AB (“Handheld”), specialised within the product segment rugged computers for an international customer base. The acquisition accelerates the pace in MilDef’s strategy for profitable growth, adding a complementary product segment, broadening the customer base as well as strengthening MilDef’s international footprint, including increased market presence in prioritised markets, such as the US and Germany. MilDef envisions substantial commercial synergies within several segments, most notably through cross-selling along the companies’ current verticals. The initial purchase price amounts to 350 MSEK, which corresponds to an EV/EBITDA-multiple of approximately 10x, based on Handhelds estimated EBITDA for 2022. The cash consideration amounts to 270 MSEK and is financed within the framework of existing credit facilities whilst the remaining 80 MSEK is paid with newly issued MilDef shares. With the aim of facilitating continued growth through strategic acquisitions, MilDef will explore potential forms of capital raising.

• The acquisition of Handheld serves several purposes for MilDef’s expansion. Product wise, we strengthen areas where MilDef previously have had some gaps, from an organisational perspective MilDef gains access to prioritised geographic markets and operationally both businesses are equipped with competences and capabilities that will complement one another. An aspect that is extra interesting is Handheld’s successful business in the US, where we see good potential to accelerate together through joint forces in this important market. The companies have limited overlaps and complement each other well. Together, we look forward to building something greater and better. It is with great joy that we welcome Handheld’s staff to the MilDef-family, says Björn Karlsson, CEO MilDef Group.
• It is rare that two companies within the same area of business not only complement each other’s businesses in such a good way but are also likeminded in company culture with a strong team spirit as one of many important success factors. I am excited about the possibilities that this creates and look forward to continuing building Handheld under the MilDef umbrella. This deal will help us boost our future businesses moving forward, says Thomas Löfblad, CEO, Handheld Group.

The acquisition in brief

• The initial purchase price amounts to 350 MSEK. In addition, the acquisition price could increase with a maximum of 100 MSEK through an earnout if certain financial targets for 2022 are exceeded.
• The majority of the purchase price will be paid in cash. The cash consideration amounts to 270 MSEK and is financed within the framework of existing credit facilities. The remaining 80 MSEK will be paid through newly issued shares in MilDef. For the former majority shareholder in Handheld Group, the newly issued shares will be subject to lock-up agreements for 18 months from the acquisition. The price at which the shares will be issued at will be based on the volume weighted average price for MilDef’s shares on Nasdaq Stockholm for the 10 days prior to (but not including) the date when the agreement of the acquisition was announced, i.e. 71.02 SEK per share (“VWAP 10”).
• The substantially larger client base, extended product portfolio as well as increased market presence in prioritised markets, creates possibilities to achieve commercial synergies and growth. The revenue synergies, measured on an annual basis, are estimated to 50-100 MSEK and are expected to be reached within two to three years, whilst the cost synergies, measured on an annual basis, are estimated to 0-5 MSEK.
• Handheld’s operation will continue to operate as a separate unit under the name Handheld, whilst the process of realising commercial synergies and improving scalability will commence immediately.
• The transaction and integration costs as well as acquisition related costs are estimated to less than 1 MSEK and will be reported for the years 2022 and 2023. The transaction costs will be reported and presented as items affecting comparability.
• The acquisition of Handheld is estimated to have an accretive effect on MilDef’s earnings per share already from and during 2023.
• The shares in Handheld are admitted on the date of the acquisition, which will at the earliest occur on the 21st of September 2022 and at the latest on the 31st of October. Handheld will be consolidated in the consolidated accounts from the date of the acquisition.

CT Bureau