Mercury acquisition embeds its presence in military systems

Secure processor specialist Mercury Systems Inc. has moved to corral a larger share of the military electronics market with its acquisition of several key units within competitor Microsemi Corp.

Mercury Systems, of Chelmsford, Mass., announced Wednesday it will acquire Microsemi's embedded security, radio-frequency, microwave and custom microelectronics businesses for $300 million. If approved by regulators, Mercury claimed the deal would make it the largest commercial vendor of embedded secure processing gear for the military.

Given the size of the transaction and its potential impact on the defense electronics market, the acquisition is subject to U.S. antitrust review. Mercury nevertheless expects the acquisition of the Microsemi defense electronics units to close by the end of its fiscal fourth quarter, which ends on June 30.

Under terms of the deal, Mercury said it would finance the $300 million deal through a $265 million bank loan along with $50 million in cash. The financing also includes a $75 million revolving credit option.

Microsemi, a 55-year-old defense electronics and aerospace manufacturer based in Aliso Viejo, Calif., specializes in high-end, radiation-hardened analog mixed-signal circuits along with field programmable gate arrays (FPGAs) and application-specific integrated circuits.

The embedded security, RF and microwave, and custom microelectronics units rang up combined revenues of about $100 million in the company's last full fiscal year, ending last September. The defense electronics supplier employs about 275 engineers based in Phoenix, Camarillo, Calif., and West Lafayette, Ind.

The Microsemi acquisition "covers all three major parts of our business and, in effect, positions Mercury as the defense industry’s largest commercial embedded secure processing company," Mercury Systems CEO Mark Aslett asserted in announcing the deal. He added that the acquisition also adds secure solid-state drive storage to the company's portfolio along with mixed signal system-on-chip processing capabilities.

If approved, the acquisition also would nearly double the size of Mercury Systems' RF and microwave business, Aslett said.

Mercury Systems specializes in pre-integrated subsystems used in C4ISR and electronic warfare platforms. 

Among Microsemi's military products are radar and electronic warfare front ends, including RF amplifiers, transmit/receive modules and DC/DC converters. Its FPGA technology also is used to provide secure networking for military communications. The programmable chip technology is increasingly viewed as providing greater flexibility and performance for military applications such as cryptographic services.

Mercury Systems said Microsemi executives heading the three business units acquired in the deal would join the company.