Magal Security Systems, Ltd. (NASDAQ: MAGS), a leading international provider of comprehensive physical, video, and access control security products, and solutions, as well as critical site management, announced today its entry into an asset purchase agreement to sell its Integration Solutions Division, or projects division, to Aeronautics Ltd., a subsidiary of RAFAEL Advanced Defense Systems Ltd., for approximately $35 million. The transaction is expected to be completed by the second quarter of 2021 and is subject to customary closing conditions, including regulatory approvals.
Magal’s strategic decision to divest its projects division, will enable the Company to focus on providing technology-rich products, solutions and related services in its four key verticals: energy, logistics, critical infrastructure and correctional facilities. These verticals provide Magal the greatest opportunity to increase its security and related markets offerings while expanding its customer base.
Following the sale of the projects division, Magal, through its Israeli based headquarters, will continue to operate its Senstar product division, with development and manufacturing facilities located in Canada and sales offices in the US, EMEA, APAC, and LATAM regions. For the last 12 months, Senstar’s revenue represented 46% of the consolidated Magal revenue while delivering a 64% gross profit margin, compared to the consolidated 45% gross margin. Senstar’s R&D during the last 12 months represented 12% of its revenues, as compared to 8% for the consolidated company.
Post-divestiture, Magal anticipates higher growth rates with improved gross margins and a stronger balance sheet. The Company will leverage Senstar’s industry-leading position, continue expanding its tech-rich product and software lines organically and intends to optimize future strategic acquisitions to achieve incremental growth in its global markets.
Dror Sharon, Chief Executive Officer of Magal, said, “Magal’s future direction lies in developing industry-leading technology for the security industry. Senstar’s track record of growth and profitability is highly scalable to deliver ongoing operating leverage and deliver long-term shareholder value. The Senstar team is continuously innovating, improving product lines, and developing new products that set a standard for quality, innovation, and reliability. The divesture gives our business model greater visibility and a stronger balance sheet to stay on track with our acquisitions strategy and to execute our long-term growth strategy.”
Moshe Elazar, President and CEO of Aeronautics Group: “Magal’s project division will become an independent company under Aeronautics Group. Aeronautics Group is fully committed to Magal’s partners and customers worldwide. Magal’s projects international footprint, experience and technology combined with Aeronautics’ proven solutions, is a significant part of the Group growth strategy in the HLS and advanced para-military markets”
Pursuant to the share and asset purchase agreement, Aeronautics agreed to acquire the project division from Magal for a purchase price of $35 million in cash, on a cash-free debt-free basis subject to post-closing working capital and other customary adjustments. As part of the acquisition, Aeronautics is also acquiring Magal’s facility in Yehud, Israel. The share and asset purchase agreement contains customary representations, warranties, covenants and indemnification provisions. Subject to regulatory approvals and the satisfaction of customary closing conditions set forth in the share and asset purchase agreement, Magal expects the acquisition to close during the second quarter of 2021.
The foregoing description of the share and asset purchase agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the share and asset purchase agreement, a copy of which is an exhibit to Magal’s Form 6-K that has been filed with the Securities and Exchange Commission on this date.
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