Benzinga | Apr 29, 2021 06:04AM EDT

Lantronix Reports Deal To Buy Electronics And Software Reportable Business Segment From Communication Systems For $25M

Lantronix Inc. ("Lantronix") (NASDAQ:LTRX), a global provider of Software as a Service (SaaS), connectivity services, engineering services, intelligent hardware and turnkey solutions for the Internet of Things (IoT) and Remote Environment Management (REM), today announced that it has entered into a definitive Securities Purchase Agreement to acquire Transition Networks and Net2Edge, which comprises the Electronics and Software reportable business segment of Communications Systems Inc. (NASDAQ:JCS) ("CSI").

Under the terms of the agreement, Lantronix will pay CSI a base price of $25.0 million, subject to customary working capital adjustments following closing, plus an earn out of up to $7.0 million, based on revenue milestones for the two 180-day periods following closing of the securities purchase agreement. The agreement is subject to customary closing conditions and CSI shareholder approval and is expected to close in June or July of 2021.

The transaction will bring immediate scale to Lantronix, with the revenues from the combined company expected to total more than $100 million on an annual basis. The acquisition will bring complementary IoT connectivity products and capabilities, including switching, Power over Ethernet (PoE) and media conversion and adapter products. Lantronix sees significant operating and product development synergies in the combined company and expects the acquisition will be immediately accretive upon closing and significantly accretive in the first full year of operations. Lantronix will have further commentary on synergies, accretion and non-GAAP EPS expectations upon closing.

"The acquisition of Transition Networks and Net2Edge demonstrates our continuing commitment to deliver incremental growth and shareholder value through acquisition," stated Paul Pickle, president and CEO of Lantronix. "In this transaction, we added significant revenue scale and operating model efficiencies while adding a highly complementary Industrial IoT connectivity product offering targeting Smart City infrastructure with significant long-term revenue synergy opportunities. We expect this acquisition will be accretive immediately upon closing, and we will drive synergies throughout our model to deliver increased cash flow for future acquisitions and for the benefit of our shareholders."

Lantronix will host an investor conference call and audio webcast at 5:00 a.m. Pacific Time (8:00 a.m. Eastern Time) on Thursday, April 29, 2021. To access the live conference call, investors should register before the call at the following link: https://attendee.gotowebinar.com/register/7605844611974218768

O'Melveny & Myers LLP served as legal advisor to Lantronix.