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Drone Maker AeroVironment Soars on Deal for Arcturus UAV

AeroVironment agreed to acquire Arcturus UAV for a combination of cash and stock in a bid to expand its product portfolio.

Shares of AeroVironment  (AVAV) - Get AeroVironment Inc. Report rose sharply Thursday after the drone maker entered into a definitive agreement to acquire another drone maker, privately-held Arcturus UAV, for $405 million in a cash and stock deal.

Shares of the Simi Valley, Calif., company were rising 28.0% to $123.07 on Thursday afternoon.

Terms of the deal include a payment of $355 million in cash by AeroVironment and  $50 million in stock, AeroVironment said.

The transaction, expected to close during the fiscal fourth quarter of AeroVironment’s 2021, which ends in April, and subject to customary closing conditions and regulatory approvals, was unanimously approved by the boards of directors at both companies.

Founded in 2004 and based in Petaluma, California, Arcturus is a designer, manufacturer and contractor for high-performance unmanned aircraft systems (UAS) and other related services.

“We are excited about the opportunities for value creation through our acquisition of Arcturus UAV, which will enable us to accelerate our growth strategy and expand our reach into the more valuable Group 2 and 3 UAS segments,” said Wahid Nawabi, AeroVironment's president and chief executive officer, in a statement.

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"Combining our highly complementary products and technologies will enhance our portfolio, deliver top and bottom-line growth, and enable us to provide customers with a complete set of solutions," he added.

AeroVironment said it expects the acquisition 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.

"Together, we will offer an unmatched portfolio of multi-domain unmanned capabilities, supported by our ongoing investments in artificial intelligence and autonomy, to help our customers address a broad set of defense and commercial missions," Nawabi noted.

At close, Arcturus UAV will operate as a wholly-owned subsidiary of AeroVironment and top management at Arcturus will remain in leadership positions after the close of the deal. 

"AeroVironment’s depth of experience in UAS and tactical missile systems, international presence, and impressive team is a natural fit for Arcturus UAV, and will create substantial opportunities to build on our strong momentum,” said D’Milo Hallerberg,  president and chief executive officer of Arcturus UAV in a statement.