1. Acquisition of the Electronic Products Division of Kratos Defense & Security Solutions, Inc.
1 June 2015

2. Overview
Ultra Electronics to acquire the Electronics Product Division (“EPD”) of Kratos Defense & Security, Inc. (“Kratos”) for a cash consideration of up to US$265m
EPD (formerly Herley Industries, Inc.) is a leading designer and producer of RF and microwave integrated systems and subsystems for use in electronic warfare (EW), radar, communication, missile, flight test and simulation applications
Sole-source provider of proprietary technology on existing and future strategic platforms
Long-standing relationships and proven performance on mission critical national security programmes
Well-positioned for opportunities on F-35 JSF and other strategic national defence and security programmes
New England (HQ)
Lancaster
CTI
EWST
Massachusetts, US
Pennsylvania, US
New Jersey, US
Hampshire, UK
Integrated MW assemblies
MW switches and components
High power coaxial and waveguide components
Receiver protectors
Hybrids
Flight instrumentation
RF/MW assemblies
Telemetry
Automatic carrier landing systems & data acquisitions
IFF systems
Signal generation
Up/down conversion
Synthesizers
Oscillators
Radar target generators
Digital RF memories
Systems for electronic countermeasures
Radar target & radar threat simulation equipment for operator training
System test & evaluation
Note: Ultra is acquiring Kratos’ Electronic Product Division (EPD). EPD has separate Israeli businesses named Kratos-General Microwave Israel and Kratos GMI-Eyal, which are not part of this acquisition

3. EPD current platforms and customers
Select critical platforms
P-8A Poseidon
Trident II D5 Missile
F-16 Fighting Falcon
EA-18G Growler
SEWIP
Eurofighter Typhoon
Top customers
Government
Defence primes
2014A revenues by customer type

4. Strategic rationale
Establishes a major presence in the growing market of electronic warfare (EW)
Provides market and customer synergies with Ultra’s C2ISR market segment
Well-established supplier to the attractive US EW market, which is growing at over 3% CAGR
Long-term contracts strengthen Ultra’s order book visibility
The combined technologies under Ultra’s ownership will provide opportunity to gain market share
One of the few providers of specialist RF/ Microwave applications for
electronic warfare & electronic attack in the market space, with decades
of proven performance and strong pipeline of future opportunities

5. Transaction highlights
Consideration
Total enterprise value of US$260m paid in cash at closing
Up to additional US$5m in cash in consideration of utilising tax assets and is expected to be paid within the next 12 months
Financial
data
EPD 2014: EBITDA - US$22m; PBT US$11m; gross assets US$217m
Annual capex and depreciation – c. US$4m
Approvals, terms and timing
Subject inter alia to US regulatory approvals
Transaction expected to close in Q3 2015

6. Financial impact
Financial
Transaction will be earnings accretive from the first full year
2016E Net Debt/EBITDA expected to be comfortably below 2x
Purchase price represents 7.7x LTM EBITDA taking into account tax benefits and run-rate cost synergies to be realised
Synergies
Recurring pre-tax cost synergies of approximately US$8.0m per annum to be delivered in full by the end of 2019
Production efficiencies
Site rationalisation
Elimination of duplicated overheads
Section 338(h)(10) election tax shield results in tax savings of c.$5m pa for 15 years
No revenue synergies have been assumed
Funding
Mix of Ultra’s existing facilities and a new 4 year US dollar term Loan
Key terms and covenants match those of existing facilities