The Chronicle Herald (Provincial)
Kraken Robotics in acquisition mode
Ocean tech firm proposes purchase of another St. John’s company, Pangeo Subsea
Kraken Robotics Inc. has been released again, this time proposing to acquire another St. John’s company, Pangeo Subsea Inc.
Kraken announced on Friday that it signed a nonbinding letter of intent Thursday that proposes the acquisition of Pangeo Subsea from Cahill Innovation Inc., a member of the Cahill Group of Cos., and Argentum Asset Management AS.
Although the letter of intent is non-binding, Kraken management indicated it expects the purchase price will be between $18 million and $24 million, based on Pangeo’s performance over the two-year period following the acquisition, to be paid by way of cash and stock over that period.
Based on initial information provided by Pangeo, the unaudited consolidated assets at Dec. 31, 2020 were $11.7 million and net debt was $400,000. Unaudited trailing 12-month revenues for the period ended Dec. 31, 2020, were $9 million and the corresponding earnings before interest, taxes, depreciation and amortization were a loss of $500,000, which “was down from comparable 2019 revenues of $10.8 million and EBITDA of $2.3 million. The year-over-year decline was largely due to the impact of COVID on customer activity,” according to Kraken management.
SENSOR MAKER
Kraken is a marine technology company that produces and sells sensors, subsea batteries and thrusters, and underwater robotic systems. It is headquartered in St. John’s, with offices in Dartmouth, Toronto, Boston, Germany and Denmark.
“Since plans for our Oceanvision project started in 2018, we have been preparing our industry-leading synthetic aperture sonar and 3D underwater laser scanning technologies to be used in a robotics/data-asa-service business model as opposed to a product-only strategy,” Kraken president and CEO Karl Kenny said in a statement.
“While customers in the defence industry generally purchase this technology, in the commercial market customers are more focused on the provision of services by capable third-party companies. We believe that this potential acquisition would complement Kraken’s existing products and services with a stronger base of recurring revenues.”
Moya Cahill, Pangeo’s cofounder and CEO, resigned as a member of the Kraken board of directors to facilitate a fair and independent evaluation of the bid to acquire her company.
“Notwithstanding that there is due diligence and negotiation for Kraken to complete this acquisition, this opportunity is very exciting for Pangeo as Kraken and Pangeo are world leaders in seabed and sub-seabed technology applications, respectively,” Cahill said in the release.
“Assuming closing of this transaction, I am confident that ocean industry customers will benefit from a broader suite of offerings from sensors, platforms and service delivery solutions.”
CAHILL GROUP
Pangeo is described as a private services company specializing in high-resolution 3D acoustic imaging for the sub-seabed. It is part of the Cahill Group, which was founded in 1953 by Gerard Cahill, who started G.J. Cahill & Co. as an electrical services contractor providing installation, upgrade and maintenance services around St. John’s. Nearly 70 years later, the Cahill Group has expanded to include mechanical, piping, instrumentation and fabrication in Atlantic and Western Canada.
Kraken management has indicated it does not expect significant integration risk “as Pangeo’s management team is also headquartered, and has significant operations, in Newfoundland and Nova Scotia.”
The two parties have until May 31 to iron out a deal, and the proposal may be terminated if one cannot be reached.
Following completion of the deal, Kraken will be able to offer technologies and services in subsea acoustic and optical imaging.
On Wednesday, Kraken announced it had filed “a final short-form base shelf prospectus” with securities regulatory authorities in each of the provinces and territories of Canada.
It allows Kraken to qualify the distribution of up to $65-million worth of common shares, debt securities, subscription receipts, warrants and units, or any combination thereof, during the 25-month period that the prospectus remains effective.
Kenny indicated that it "will provide us with financial flexibility in connection with our continued growth and will permit us to act more quickly to take advantage of any future opportunities that may arise.”