AeroVironment's (NASDAQ: AVAV) latest news item fueled something of a rally in the stock on Wednesday. The drone manufacturer essentially got the shareholder green light to proceed with an acquisition, and the market greeted this by pushing the stock more than 4% higher on the day. This was more than good enough to top the bellwether S&P 500 index's 0.7% rise.
New share issue approved
Just after market close Tuesday, AeroVironment announced that a stockholder vote approved a fresh issue of the company's common stock to help fund its acquisition of privately held peer BlueHalo. According to management, over 99% of the votes were in favor of the measure.
Last November, AeroVironment agreed to purchase BlueHalo in an all-stock transaction valued at around $4.1 billion. The latter is in the portfolio of private equity firm Arlington Capital Partners, and concentrates on next-generation defense technology such as laser weapon systems.
At the time, AeroVironment said that the move "will create a diversified defense tech company with a highly complementary and differentiated portfolio of solutions" in a range of modern combat systems.
With the shareholder approval for the stock issue, the company said it expects the BlueHalo deal to close next month.
A very ambitious buy
BlueHalo is certainly a big swallow for AeroVironment, so the buyer is to be commended for carving out a deal involving only stock (rather than precious cash). BlueHalo is a sizable company relative to its acquirer, and it's reasonable to assume it'll be quite a bit of work to fuse it with AeroVironment. Many eyes will be on the latter's management gauging how that process unfolds.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends AeroVironment. The Motley Fool has a disclosure policy.
