Smiths buying Trak Communications

U.K. engineering group Smiths Group plc planned to announce April 24 that it will buy Tampa, Fla.-based communications technology company Trak Communications Inc. from Veritas Capital for $111.5 million.

The English company plans to integrate Trak, which makes equipment for satellite transmissions, wireless phones and missile guidance systems, into its Smiths Interconnect business unit, which supplies connectors, cable, assemblies, microwave components, antennas and other items to military and commercial customers. Trak has 425 employees and had $71 million of sales in 2003.

"We have taken this company to the level where it is better served to be part of a larger company," said Robert McKeon, chairman of Veritas Capital. "As an investor, we felt this was the proper time to have a realization."

Veritas inherited Trak when one of its portfolio companies, Integrated Defense Technologies Inc., purchased Houston-based electronic component manufacturer Tech-Sym Corp. for $182 million in June 2000. Integrated Defense then spun off Trak as a standalone company for Veritas, which then invested $15 million.

The New York buyout firm will realize $90 million, after debt is paid off, from its investment in Trak four years ago — 6 times its money.

Four years ago, Trak was overly reliant on Nortel Networks Corp. as a customer, which provided 40% of Trak's revenue, McKeon said. Veritas worked to reposition the company as a leading supplier of radio frequency microwave devices, and its customer base shifted from 70% commercial companies to 75% defense-related business.

Trak's key customers today are BAE Systems, Motorola Inc., Nokia Oyj, Northrop Grumman Corp., Raytheon Co. and Telefonaktiebolaget LM Ericsson, as well as government entities.

The deal is Smiths' fifth transaction since the company posted its interim results March 10. The transactions total £187 million ($331 million).

Pending regulatory approval, the Trak deal is expected to close by June.

CIBC World Markets Corp. investment bankers Ed Eppler and Bruce McCarthy served as financial advisers to Veritas.

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