Comtech Telecommunications Corp. provides business and M&A litigation update
Comtech Telecommunications Corp. has provided a business update related to its fourth quarter fiscal 2020 targets and its pending lawsuit against Gilat Satellite Networks Ltd.
Business Update: Q4 Fiscal 2020 Targets
Comtech remains an essential business as defined by the U.S. government and continues to operate its business with the safety of its employees, customers, partners and suppliers in mind. Despite the reported increase of coronavirus infections around the world and ongoing travel limitations, Comtech’s business is rebounding, and Comtech expects that its fiscal 2020 fourth quarter consolidated net sales and Adjusted EBITDA will be meaningfully better than the results it achieved during the third fiscal quarter of 2020. Net income for Q4 will be impacted by $4.7M of acquisition costs and M&A legal expenses.
Commenting on the business activity experienced so far during the current quarter, Chairman and CEO Fred Kornberg stated: “Our customers appear to be adjusting to new ways of doing business and our pipeline of opportunities looks like it is growing. We are very fortunate to have a diverse customer base and a broad range of products and services, many of which—like our 911 solutions for public safety agencies and U.S. government solutions —address critical communications needs.”
Business Update: M&A Litigation Update
Comtech has amended its complaint in the pending lawsuit against Gilat, adding to the complaint a request for a declaratory judgment that Gilat has suffered a Material Adverse Effect (as defined in the Merger Agreement). The amended complaint alleges that this is due in significant part (but not entirely) to the enormous damage the COVID-19 pandemic has done to the airline industry – an industry upon which Gilat is disproportionately dependent compared to its peers and other companies in the industries in which it competes. As a result, the amended complaint alleges that Comtech is not required to close on the acquisition of Gilat.
The amended complaint retains Comtech’s earlier request for a declaratory judgment that certain actions, including unilaterally interfering in Comtech’s application for Russian regulatory approval and/or disposing of and/or restructuring Gilat’s business operations in Russia, if taken by Gilat, would breach Gilat’s obligations under the Merger Agreement.
Comtech believes that it remains in compliance with all of its obligations under the merger agreement with Gilat. Further, without waiver of its rights as set forth in the Amended Complaint, unless and until its merger agreement with Gilat is terminated, Comtech intends to continue to comply fully with its obligations under the merger agreement, including all obligations with respect to seeking Russian regulatory approval.