YTD: 11% NYSE: TDY Thousand Oaks A series of strategic acquisitions has expanded the company beyond planet Earth. Situation In March, Teledyne closed its acquisition of systems manufacturer E2v Technologies in England. E2v makes image sensors, radio frequency subsystems and semiconductors for the space science, health care, defense and aerospace industries. The $789 million deal expanded Teledyne’s technical capabilities as well as gave it a foothold in Europe and represents the latest in a steady drumbeat of acquisitions by the diversified aerospace, marine and energy engineering company. Last year Teledyne completed five acquisitions worth a total $93.4 million. The company’s expansion is projected to extend into the solar system. In March a Teledyne subsidiary in Thousand Oaks received a $10 million contract to provide detectors for a mission to Jupiter launching in 2022. The instruments will be aboard the Jupiter Icy Moons Explorer mission – known as Juice – of the European Space Agency that will arrive at Jupiter in 2030. Also, Teledyne provided an Earth-sensing system for the International Space Station that launched on a SpaceX Falcon 9 rocket from NASA’s Kennedy Space Center on June 3. Orbiting about 250 miles above the Earth, the system will give data for disaster response, maritime monitoring, agriculture, air and water quality, oil and gas exploration, mining, atmospheric investigations and fire detection. Their Words “From industrial machine vision to space-based imaging, microwave devices spanning radar to radiotherapy, and specialty semiconductors through micro electro-mechanical systems, our respective capabilities and engineering-centric cultures are truly a great fit.” – Chief Executive Robert Mehrabian in March 28 statement on E2v acquisition “Our strategy continues to emphasize growth in our core markets of instrumentation, digital imaging, aerospace and defense electronics and engineered systems. Our core markets are characterized by high barriers to entry and include specialized products and services not likely to be commoditized. We intend to strengthen and expand our core businesses with targeted acquisitions and through product development.” – 2016 annual report “While Teledyne e2v is our largest acquisition to-date, it is a company made up of a combination of strong businesses, all of which are large bolt-ons to existing businesses inside Teledyne. … The integration is going very well, and we’re very impressed with the quality of e2v management, employees and technologies. Just as an example, while Teledyne e2v represents approximately 13 percent of Teledyne’s pro forma combined revenue, e2v’s patents represent approximately 40 percent of our combined portfolio of over 2,000 issued active patents.” – Chief Executive Robert Mehrabian on May 4 conference call “This mission exemplifies Teledyne’s commitment to exploration and discovery, from the ocean floor to deep space.” – Chief Executive Robert Mehrabian in March 20 statement on Jupiter contract “My predecessor, Henry Singleton, founded Teledyne July 1960. We’ve been in operation as an independent company for 57 years, with the exception of a failed marriage between mid-1996 and late-1999. I’ve had the privilege of serving as the CEO of the company since our divorce in late 1999, or spinoff in the accepted Wall Street jargon, and this is my 70th earnings conference call. As I noted in my annual letter to stockholders, compared to any time in the past 17 years, I’m the most excited about our current business portfolio and the overall outlook of our markets.” – Chief Executive Robert Mehrabian on May 4 conference call Analysts & Observers “Teledyne has taken on a bit of leverage in recent years … Holding $100 million in cash at the end of the third quarter (2016), Teledyne operated with a net debt load of a little over $500 million. The near $800 million deal with e2v will more than double the net debt load towards $1.3 billion.” – The Value Investor, Seeking Alpha On July 5, Needham & Co. analyst James Ricchiuti upgraded Teledyne to “buy” from ‘hold,” citing the company’s strong first quarter and his “growing confidence in the commercial business.” Average Analyst Recommendation: 2.7 1 Strong Buy 2 Buy 3 Hold 4 Underperform 5 Sell Source: Thomson Reuters
