L-3 Communications [LLL] has acquired United Kingdom-based MacDonald Humfrey for $280 million in cash, bolstering the company’s aviation security business by adding system integration capabilities around automated checkpoint solutions.
The purchase price has a potential earn-out provision of $37.5 million if MacDonald Humfrey meets certain performance targets in 2017, 2018 and 2019. L-3 says MacDonald Humfrey is expected to generate $135 million in sales in 2017. The company also says the purchase price represents a multiple about 10 times MacDonald Humfrey’s estimated 2017 earnings before interest, taxes and depreciation and amortization.
MacDonald Humfrey supports a number of industries, including airports, automotive, commercial, instrumentation, logistics, nuclear and water but L-3’s interest is related to aviation security.
“L-3 has been very focused on developing total aviation checkpoint solutions built around our innovative ClearScan carry-on baggage screening system and our ProVision personnel screener,” says Michael Strianese, L-3’s chairman and CEO. “The acquisition of MacDonald Humfrey, with its market-leading checkpoint management systems and security efficiency software, will enhance our ability to deliver scalable, operationally-based networked security systems. L-3 MacDonald Humfrey enhances our position in the global aviation security market while at the same time creating new opportunities for that business as it leverages existing worldwide distribution channels.”
MacDonald Humfrey’s Mach-Secure suite of products and system is designed for airport security applications with the goal of increasing efficiency of security systems while improving the passenger experience and lowering operating costs.
The Mach-Secure product line includes a checkpoint SmartLane with automated bin return, a modular construction to allow a number of layouts, parallel passenger divesting techniques, integration with different X-Ray systems, configuration for local or remote screening, and the ability to separate un-cleared bags from cleared baggage.
A slew of additional products are also included in the Mach-Secure suite, such as the SmartView system that enables screeners to tag suspected threat items for viewing by a separate screener, centralized X-Ray screening through SmartViewMatrix, the SmartVision checkpoint integrated CCTV, a personnel and asset tracker, an airport workforce management system, and a passenger flow analysis and forecasting system.
MacDonald Humfrey will report to L-3 Security & Detection Systems (SDS).
“We will be able to more effectively address continually evolving security requirements and the growing end-user demand for centralized screening supported by common data networks,” Tom Ripp, president of L-3 SDS, says of the acquisition.
The acquisition comes at a time when airports and regulatory entities globally, including the U.S. Transportation Security Administration, are testing and deploying automated checkpoint lanes that provide for more efficient security and passenger flow. TSA, partnering with United Airlines [UAL], so far has opened automated security lanes in airports in Atlanta, Chicago, Los Angeles, and Newark, N.J.
TSA says the new screening lanes have decreased the time travelers spend in security screening by up to 30 percent.
MacDonald Humfrey has deployed its solutions at airports in Europe, the Middle East and Canada and is engaging with airports and airlines in the U.S. to reduce checkpoint delays and develop passenger and baggage tracking systems to facilitate efficient security throughout airports, L-3 says. The London-based company also has a number of industry clients in the aviation security and airports space, including OSI Systems [OSIS], BAE Systems, Safran Group, Smiths Heimann, Vanderlande Industries, Jervis Webb and more.
The MacDonald acquisition by L-3 follows a deal this summer by another U.S. aviation security system provider, OSI Systems, which acquired Britain’s Herbert Systems, a developer and manufacturer of automated tray return systems deployed at 200 airport checkpoint lanes in the Middle East, Asia and the United Kingdom. OSI says that the Herbert acquisition fits with its strategy to become a total solutions provider for airports.
L-3 also recently made a commitment to acquire Implant Sciences [IMSC], a provider of desktop and handheld explosive trace detection (ETD) systems for use in aviation, transportation, and critical infrastructure security worldwide. The ETD systems represent a new product line for L-3 SDS and provide it with a strong global customer base, including the TSA.