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Teledyne Technologies (TDY) Acquires FLIR Systems for $8B

Zacks.com logo Zacks.com 5/17/2021

Teledyne Technologies, Inc. TDY has recently completed the acquisition of FLIR Systems, one of the pioneers in thermal imaging, in a cash-and-stock deal worth approximately $8.2 billion. Teledyne expects the acquisition to be immediately accretive to its earnings, excluding transaction costs and purchase price accounting, and GAAP earnings in the first full calendar year following the acquisition.

Per the agreement, FLIR Systems’ stockholders received $28.00 per share in cash and 0.0718 shares of Teledyne common stock for each FLIR Systems’ share, which implies a total purchase price of approximately $57.40 per FLIR share based on Teledyne’s closing price on May 13, 2021. FLIR Systems will now be included in Teledyne’s Digital Imaging segment and operate under the name, Teledyne FLIR.

FLIR Acquisition to Boost Teledyne’s Growth Prospects

The cameras, sensors and sensor systems that both Teledyne and FLIR Systems manufacture are uniquely complementary with minimal overlap. Therefore, if such products are being sold together, they will be able to capture a larger market share. So, by acquiring FLIR Systems, Teledyne not only expanded its imaging sensor portfolio in terms of volumes but the deal will also help it gain production efficiency as well as economies of scale.

While factors like the increased incorporation of high-resolution cameras equipped with image sensors in mobile devices and a rise in the use of image sensors in improved medical imaging solutions have been boosting the image sensor market, the COVID-19 crisis has been a boon for this industry. In particular, the rapid spread of COVID-19 over the past year has pushed up demand for thermal cameras and other thermal sensor systems.

Looking ahead, the image sensor market size is projected to reach $28 billion by 2025 from an estimated $18.5 billion in 2020, at a CAGR of 8.6%, per the Markets and Markets research firm. No doubt, on completion of the transaction, Teledyne will successfully reap the benefits of the image sensor market’s growth projection, through revenue and profit expansion.

Recent Acquisitions in the Defense Space

In recent times, we witnessed quite a few major mergers and acquisitions within the U.S. defense space, irrespective of the global volatile market conditions caused by the COVID-19 pandemic.

In May 2021, Leidos Holdings, Inc. LDOS completed the acquisition of Gibbs & Cox, Inc. for approximately $380 million in cash. At the end of July 2020, BAE Systems BAESY completed the acquisition of the Collins Aerospace Military Global Positioning System (GPS) business from Raytheon Technologies RTX.

Price Movement & Zacks Rank

Teledyne currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here

The stock has gained 8.7% in the past six months compared with the industry’s growth of 14.6%.

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