Vricon 3D visualization of Damascus, Syria Photo: Vricon via Business Wire

Maxar Technologies has agreed to acquire Saab’s share of the two companies’ joint venture Vricon, Inc., in a $140 million cash deal. Maxar’s Tuesday evening announcement said this will allow the company to better integrate Vricon’s 3D imagery capabilities with Maxar’s solutions to improve its competitive posture, penetrate new markets and accelerate go-to-market plans with enhanced offerings. Maxar said it plans to exercise its call option on Thursday to take control of Vricon with the transaction expected to close in July.

Vricon, which has 90 employees and posted $40 million in sales in 2019, is based in Northern Virginia and counts the U.S. Army, intelligence community, other government agencies and the telecommunications industry among its customers.

Launched in 2015 as a 50-50 joint venture between Maxar and Sweden’s Saab, Vricon’s software creates detailed data sets that are used for mapping, simulation, training, Earth Observation (EO), intelligence and targeting applications, said Dan Jablonsky, CEO of Maxar, said on an investor call Wednesday morning to discuss the acquisition. Vricon also has employees in Sweden.

A key growth driver for Vricon has been the Army’s use of the company’s products in its next-generation synthetic training environments under the One World Terrain (OWT) program. The company won the potential $95 million OWT contract in June 2019.

Maxar has a constellation of four earth observation satellites to provide imagery to defense and intelligence, government, and industry customers. The company also designs and manufactures communications satellites.

Reviewing the strategic rationale for the deal, Jablonsky cited four key points, with the first being an improvement in Maxar’s competitive position with Vricon’s “distinctive” technology for defense and intelligence applications, which are customer bases that Maxar “knows very well.” He also said Vricon’s products provide accuracy on a “country-wide and global scale” unlike no one else in the business.

Maxar said in its press release announcing the deal that when its new WorldView Legion satellites begin operating in 2021, they will provide “higher volumes of more frequently refreshed, high-resolution imagery” that “will further improve the currency and utility of Vricon’s offerings and should drive subscription sales opportunities.”

The second reason is market expansion through the combination of Vricon’s technology and Maxar’s datasets “particularly in the areas of precision guided munitions, 3D simulation, training, and emerging needs for autonomous navigation,” Jablonsky said. Current spending these markets is around $30 billion, and Maxar expects to “capture a portion” of this, he said.

Jablonsky said the third point is that Maxar’s more than 100 sales and marketing employees will help Vricon, which has 12 sales and marketing reps, to increase market penetration worldwide as both company’s customer portfolios align with the U.S. and allied governments and commercial customers.

There currently isn’t any direct competition to Vricon for its products, Jablonsky told analysts.

The final reason is that Vricon’s strong execution—  sales have grown from $14 million in 2017 — combined with its technology will lead to further growth and scale combined with Maxar, he said.

At closing, Vricon is expected to have about $25 million in cash, bringing the net transaction price to $115 million. Maxar said it will appoint Vricon Chairman Gilman Louie, the founder and former CEO of the non-profit national security venture firm In-Q-Tel, to its board.

As for additional acquisitions, Jablonsky said the company’s focus is on paying down its debt. Additional deals would have to present “great upside opportunity” at the right price, which describes the Vricon acquisition. The company will be “very judicious” regarding further deals, he said.

Maxar in 2019 had net income of $109 million on $1.7 billion in sales.

This article was originally published by our sister publication Defense Daily.