The Micolab unit of Wireless Telecom Group (WTT) will be moving over to RF Industries (RFIL) when and if the recently announced deal between these companies closes. The deal was reported at $24.25 million and is subject to various terms and conditions and is subject to the positive vote by Wireless Telecom Group’s shareholders of this transaction. Microlabs, a maker of a wide range of radio frequency and microwave components, had revenue of approximately $16 million during the 12 month period ended Sept. 30, RF said. The stocks of both firms have been down significantly of late and this deal seems like a great way for both companies tell a better, more streamlined story to investors. Both companies shares are held in the iShares Micro-Cap ETF.
“Today’s announcement accelerates Wireless Telecom Group’s transformation into a leading test and measurement, and specialized 5G software service solutions provider. After the transaction is completed, we will be debt free and have approximately $17.0 million in cash and cash equivalents,” said Tim Whelan, CEO of Wireless Telecom Group, Inc. “We believe the benefits of a strengthened balance sheet and streamlined business model will drive improvements to our strategy for long-term profitable growth as we focus on our other higher-growth, higher-margin businesses.”
Mr. Whelan continued: “We are guided by driving shareholder value and we have transformed our business, increasing the size of our total addressable market, adding new higher value software solutions, and expanding our portfolio of new cutting-edge products. As a result, consolidated gross margins have increased significantly and we are expecting to benefit from larger market growth opportunities in 5G private networks, small cell deployments, and highly demanding test and measurement solutions.”
“Following the sale, our strategy will continue to focus on our specialized software and test and measurement solutions to address customer’s unique pain points developing their differentiated solutions in the semiconductor, satellite, aerospace and defense sectors. I am excited by the direction we are heading, and Wireless Telecom Group will continue to evaluate all opportunities to create significant value for our shareholders,” continued Mr. Whelan.
From the sound of this statement it appears that this components business was a lower margin business and certainly fits together better with RF Industries ongoing business strategy. WTG wants to focus on the software and test and measurement solutions while RF Industries is a robust components manufacturer. Will this transaction help RF Industries increase margins by economies of scale as an integrated manufacturer? It’s too early to tell but both firms seem well positioned to carry out their mandates as stated.
