AeroVironment, Inc. (NasdaqGS:AVAV) entered into a stock purchase agreement to acquire Arcturus UAV, Inc. for approximately $410 million on January 11, 2021. Pursuant to the agreement, AeroVironment will pay approximately $405 million consisting of $355 million in cash and approximately $50 million in unregistered, restricted shares of AeroVironment's common stock, with the cash consideration being subject to certain customary adjustments, including for net working capital, cash, debt and unpaid transaction expenses, including change in control related payments triggered by the transaction, of Arcturus UAV at closing, less $6.5 million to be held in escrow to address final purchase price adjustments post-closing, if any, and $1.8 million to be held in escrow to address Arcturus UAV's and/or the sellers' indemnification obligations. The adjustment escrow, less any negative post-closing adjustment to the cash consideration paid at closing, is to be released to the sellers upon completion of the post-closing purchase price adjustment process; the indemnification escrow, less any amounts paid or reserved, is to be released to the sellers 12 months following the closing. The sellers will receive 0.57 million shares of AeroVironment's common stock as the stock consideration.

In connection with transaction AeroVironment entered into a loan commitment letter, AeroVironment has received commitments for a $200 million Term Loan Facility and $100 million revolver (undrawn at close) with Bank of America, N.A. acting as administrative agent, and with BofA Securities, Inc., JPMorgan Chase Bank, N.A. and U.S. Bank National Association acting as arrangers. Proceeds from the Term Loan Facility will be used in part to finance a portion of the cash consideration for the acquisition. AeroVironment will fund approximately $159 million of the acquisition from cash on hand. Upon closing of the acquisition and the other transactions contemplated by the agreement Arcturus will become a wholly-owned subsidiary of AeroVironment.

The purchase price represents a multiple of approximately 11x Arcturus UAV's LTM 9/30/20 adjusted EBITDA, net of anticipated tax benefits. Arcturus had revenues of $84 million and adjusted EBITDA of $35 million for the 12 months dated September 30, 2020. Upon completion of the transaction, key members of the Arcturus executive management team will remain in leadership positions. Existing operations of Arcturus will be maintained in Petaluma and Rohnert Park, California. The transaction is subject to clearance of the acquisition pursuant to the Hart-Scott-Rodino Act, other customary closing conditions and regulatory approvals. The transaction was unanimously approved by the AeroVironment and Arcturus Boards of Directors. The transaction is expected to close during fourth quarter of AeroVironment's fiscal year 2021. The transaction is expected to be immediately accretive to revenue growth, adjusted EBITDA margin and non-GAAP diluted EPS, excluding intangible assets, amortization expense and deal and integration costs, and accretive to GAAP diluted EPS by fiscal year 2022, while increasing pro forma net leverage to 0.5 times adjusted EBITDA at close. Jefferies LLC served as a financial advisor for AeroVironment and K&L Gates LLP served as a legal advisor for AeroVironment. Evercore Inc. (NYSE:EVR) LLC served as a financial advisor for Arcturus and Hogan Lovells served as a legal advisor for Arcturus. BDO USA acted as financial advisor to AeroVironment.

AeroVironment, Inc. (NasdaqGS:AVAV) completed the acquisition of Arcturus UAV, Inc. on February 19, 2021. Arcturus UAV team will be joining AeroVironment. The total consideration paid is of approximately $422.627 million, net of cash acquired.The transaction was financed with a combination of approximately $150,218,000 of cash-on-hand, $200,000,000 of financing pursuant to the Term Loan Facility and the issuance of approximately $72,384,000 of unregistered, restricted shares of common stock.