CML Microsystems (LON: CML) has acquired a base in Silicon Valley and broadened its product range through the purchase of Microwave Technology Inc. This will help to accelerate growth.
CML is paying up to $18m for Microwave Technology Inc, which has been trading for four decades, and this will be paid out of the cash pile and the issue of shares. US regulatory approval is required and that should happen by the summer. Microwave Technology Inc generated revenues of $6.5m and lost £132,000.
The acquired business used to be a manufacturer of semiconductors and then moved to a fabless model focusing on Monolithic Microwave Integrated Circuits (MMICs). These cover 1Ghz and above frequencies and provide additional opportunities for CML. Microwave Technology Inc is predominantly a US business and there will be opportunities to sell products in other markets.
At 490p, the shares are trading on 22 times prospective earnings for the year to March 2023. That would reduce to 18 times earnings for next year before taking into account the acquisition, which should be earnings enhancing.
The expanded product range and additional expertise make the combined business more valuable. CML has developed a range of new products that are still to build up their sales, so there is plenty more to come in the future.