The transaction is conditional principally upon receiving approval from the Federal Communications Commission in respect of the transfer of Teletrac’s communications licences. The requisite consent in favour of the acquisition has been received already from Teletrac’s shareholders.
Background to and benefits of the acquisition
The USA is the largest and most influential automotive market in the world. Historically, its telematics market has lagged behind Europe but is now becoming increasingly important as new, higher speed mobile data capabilities become available and automotive manufacturers develop their telematic programmes.
Trafficmaster established a base in Detroit in June last year and has been monitoring closely developments in the US market. It commenced its evaluation of Teletrac’s operations during the summer of 2000 and has identified significant technological and operational synergies in the acquisition providing primarily revenue generating opportunities as well as cost reduction opportunities.
The acquisition of Teletrac will provide a strong platform for Trafficmaster’s expansion in the growing US market and will build on Teletrac’s advanced technology, substantial user base and operations in eleven key metropolitan areas. Trafficmaster intends to integrate its own world-leading proprietary technologies, including fixed and mobile sensors, into Teletrac’s established wireless network, to enhance Teletrac’s capabilities and provide vehicle flow monitoring to supplement its existing services.
The structure of the deal
Under Delaware State law, the acquisition requires over 50% of shareholder approval and this has been received. The consideration for the acquisition will be an initial cash payment of $15.5 million together with the assumption of $15 million of existing debt. There is provision for a further cash payment of up to $15.5 million to be made dependent upon the performance of the business over the next two years. The transaction is being financed from Trafficmaster’s existing resources and cashflow.
Completion of the acquisition is anticipated to take place by April 2001, following satisfaction of the completion conditions.
David Martell, Chief Executive of Trafficmaster Plc said, The opportunities in the USA for traffic information and other telematic services are huge. We have been seeking the right opportunity to develop our US operations during the last twelve months. With our European expansion progressing well and with operations established in Germany, France and Italy we are able now to focus management time on the US market. We see the acquisition of Teletrac as a low risk entry strategy and with the various synergies we have identified, Teletrac is a business that should be quickly earnings enhancing.
