Honeywell hopes the move bolsters its global tracking tools and computing product lines, as an EMS pick-up would include its messaging and asset tracking technology for search and rescue, as well as EMS’ aviation data storage, antennas and surveillance tools to gather data. EMS’ LXE handheld devices and vehicle-mounted computers use satellite tracking to monitor cargo, assets and personnel. EMS’ global tracking tools are being used by military personnel in Afghanistan to track assets via satellite.
    In a July 8 analysis report, GLG Research said the acquisition would enable Honeywell to benefit from the recent contracts issued for on-board gear on the WGS X- and Ka-band satellite system for the U.S. Air Force and for the Iridium Next constellation of low-orbiting mobile communications satellites as EMS provides switches for the 81 Iridium Next satellites under a contract with Thales Alenia Space.
   "EMS could turn out to a valuable addition to the portfolio, by adding leading positions in markets that are closely aligned with favorable trends in the growing Command, Control, Communications, Computers, Intelligence, Surveillance and Reconnaissance (C4ISR) space and commercial aerospace segments.  With the numerous challenges arising from both commercial and technical concerns, there will also be some further consolidation of the key companies in the marketplace.  These demands will also lead to greater partnerships with the leading players looking for new acquisitions like EMS technologies," GLG said in the report. 

    Honeywell CEO Dave Cote hopes the deal would add to its profits as quickly as the next fiscal year. “Honeywell is uniquely positioned to acquire EMS due to the strategic fit across EMS’s global resource management and aviation divisions,” Cote said in a statement.

    Bank of America / Merrill Lynch advised EMS Technologies on the transaction, and King & Spalding and Kirkland & Ellis served as legal counsel. RBC Capital Markets analyst Robert Stallard said that while some investors are concerned about EMS’ selling price, the acquisition price did not surprise his firm. “This is not a cheap acquisition, which is perhaps what we should expect for high technology, electronics companies. Honeywell has ample financial capacity to bolt on companies like EMS, but we think investors may have concerns that Honeywell is paying a high price in deploying this surplus capital,” Stallard said.

    EMS Technologies, which offers connectivity solutions across a number of different segments, saw its space and defense business struggle in the early months of 2011. Its revenues from the space and defense part of its business generated a little more than $14 million in revenues compared with 2010’s first quarter total of $16 million. EMS’ operating profits from defense and space also fell by more than 50 percent year-over-year.

    Richard Valera, a technology equity analyst at Needham & Company said in a May research note that EMS’ performance in the defense and space business did not reach its $17 million expectations.

    “The defense and space backlog increased to $87 million from $73 million quarter-on-quarter, primarily due to a near-$20 million order for the Iridium Next program,” said Valera. “With EMS’ Board having retained an advisor to explore strategic alternatives, we expect the shares to trade more on potential take-out valuation than near-term fundamental performance.”

    Reuters later reported that EMS put itself up for sale under pressure from MMI Investments — a 7.8 percent stakeholder in EMS. The report also said that EMS offered the MMI hedge fund an opportunity co-lead the sale process alongside its board of directors. Following the May announcement, EMS said it drew initial interest from a list of companies that included Comtech Telecommunications and that final bids for the company were due around June 9.