en.Wedoany.com Reported - Global communication technology company Comtech Telecommunications Corp. (NASDAQ: CMTL) announced it has reached a definitive agreement to sell the majority of its satellite and space communications business to Gilat Satellite Networks Ltd. (NASDAQ: GILT, Tel Aviv Stock Exchange: GILT) for $157.5 million. The transaction, unanimously approved by both companies' boards, will transform Comtech into a company focused on public safety technology, which will be renamed Allerium upon completion.
Under the terms of the agreement, Gilat will acquire the majority of the S&S business for $157.5 million, with $10 million paid on June 15, 2026. Comtech will retain certain cybersecurity-related assets within the S&S business and the right to collect certain accounts receivable. The transaction is subject to customary closing conditions, including regulatory approvals, and is expected to close in the fourth quarter of 2026. This transaction concludes Comtech's previously announced strategic alternatives process.
Comtech also announced amendments to its existing credit facilities and agreed to replace existing convertible preferred stock with a series of new convertible preferred stock to improve the company's financial flexibility. Upon completion of the transaction, the company plans to use net cash proceeds to reduce debt and restructure its business, providing a stronger financial position for the remaining Allerium business.
Chairman, President, and CEO Ken Traub stated that the sale of the majority of the S&S business, along with agreements reached with lenders and preferred stockholders, represents a significant milestone in Comtech's transformation and reflects the successful execution of its strategy. Traub thanked S&S President Daniel Gizinski, as well as the leadership and operational teams, for driving the business turnaround, and praised the entire organization for its work in executing the transformation, including improving profitability, cash flow, and capital structure, streamlining operations, and focusing strategy on the Allerium public safety business.
Traub noted that during the months awaiting regulatory approval, the company will execute a transition plan to focus the organization on Allerium's growth as a leader in next-generation public safety technology and services. Allerium President Jeff Robertson pointed out that Allerium is the first company to integrate the complete emergency response ecosystem, covering everything from device location to systems, networks, and data analytics, helping connect emergency assistance. Allerium is at the core of NG911, call processing, location-based services, and real-time data. As the industry shifts from voice-based connectivity to data-centric communication, coordination, and real-time artificial intelligence-enhanced decision-making, Allerium aims to accelerate recurring software and services revenue growth, expanding margins and operating leverage.
Upon completion of the transaction, the company will adjust its operations, strategy, and brand to focus on public safety, renaming itself Allerium. Allerium will invest in the mission-critical market, which has significant long-term demand drivers.
S&S President Daniel Gizinski expressed pride in the team's turnaround and repositioning of the S&S business, and will continue to support the mission, customers, and partners. Gilat CEO Adi Sfadia stated that he was impressed by Comtech's successful progress and looks forward to integrating the satellite and space communications business into Gilat, calling it an excellent strategic fit.
Comtech expects net cash proceeds from the transaction to be between approximately $143 million and $145 million, after deducting approximately $12.5 million to $14.5 million in transaction-related expenses. The company will use 65% of the net proceeds to prepay the majority of its senior secured credit facility, with the remaining 35% used to repay subordinated debt, starting with the subordinated senior secured term loan.
The company expects to invest approximately $12 million to $14 million in transition-related costs, primarily incurred in fiscal year 2027, covering business system tools, capabilities, personnel, and reporting functions. After completing the sale of the S&S business and approximately one year following the transition implementation, Comtech expects annual cost savings of approximately $11 million to $13 million.
For the twelve months ended April 30, 2026, Comtech's retained business had net sales of approximately $249 million and a backlog of $554 million. Considering expected cost savings, the company estimates pro forma adjusted EBITDA for the same period to be approximately $33 million to $35 million.
A reconciliation of pro forma GAAP operating income to adjusted EBITDA shows that for the twelve months ended April 30, 2026, operating income was $2 million, intangible asset amortization was $14 million, depreciation was $11 million, restructuring costs were $5 million, CEO transition costs were $2 million, and adjusted EBITDA was $34 million. The pro forma results represent Comtech's retained business, including Allerium, certain cybersecurity-related assets, and unallocated items, plus expected cost savings.
TD Securities (USA) LLC served as Comtech's exclusive financial advisor in the transaction. Norton Rose Fulbright served as Comtech's legal advisor in the transaction and in the amendments to its credit agreement and convertible preferred stock agreement. Naschitz Brandes Amir served as Gilat's legal advisor in the transaction. Quilty Space served as Gilat's business advisor in the transaction.
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