Atlantic Research Corp. announced yesterday that it will acquire Systematics General Corp. for about $24.1 million.
According to Bernard Farkus, Systematics General's chairman and president, the merger would allow Atlantic Research to become a "major factor in the electronic-security marketplace."
Both companies are involved with "Tempest technology," the name given to a relatively new industry that produces equipment to protect computers from leaking information through radio-wave emissions.
Alexandria-based Atlantic Research Corp. tests Tempest equipment, while Systematics General focuses on developing it, primarily for the government.
Atlantic Research, the nation's largest producer of small rockets, had a profit of $9.9 million on revenue of $176 million last year. Systematics General, based in Sterling, Va., netted $1.7 million on revenues of $29.5 million, $21.7 million of which came from its sales of Tempest equipment.
"It's a case where the two companies combined can do more than they could individually," said Farkas, who added that the two have Tempest technologies that complement rather than compete.
The cost of acquiring Systematics General is linked to the price of Atlantic Research's stock, since the larger company currently has pledged to trade one share of Atlantic Research for every 3.75 shares of Systematics General.
If the Atlantic Research stock climbs, the Systematics General shareholders will receive more stock in Atlantic Research for their Systematics General shares.
However, Atlantic Research will have to recompute the number of Systematics General shares that will total one share in their company after a previousily announced three-for-two stock split takes effect on June 21. Since the individual shares will probably be worth less after the split, Atlantic Research will probably lower the number of shares in Systematics General that are needed to make up one share in Atlantic Research in the buyout, according to Atlantic Research President Coleman Raphael.
Systematics General stock rose $1.13 yesterday to $8.38 a share, while Atlantic Research dropped 50 cents to $35.75. The planned merger is contingent upon approval by both companies' board of directors and the shareholders of Systematics General.
The acquisition should benefit both firms, according to Mary Graves O'Leary, an analyst at Scott & Stringfellow in Richmond. The larger company can use Systematics General's research and development, and the smaller company needs capital, she said.