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MicroTel International Inc. Has Completed the Acquisition of Larus Corporation and Its Engineering Subsidiary Vista Labs Inc. for a Purchase Price of $5,800,000 RANCHO CUCAMONGA, Calif. --(Business Wire)-- July 15, 2004 -- Twelve Month Forward Revenue Contribution is Expected to Exceed $7,000,000 and Net Income before Tax Will Be Accretive and Should Exceed $1,000,000 or Approximately 4 Cents Per Share DilutedMicroTel International Inc. (OTCBB:MCTL), an international manufacturer of defense and aerospace electronic components and subsystems and communication equipment, today announced completion of the acquisition of Larus Corporation and its wholly owned engineering subsidiary Vista Labs Inc. Larus Corporation, a privately held company, was founded in 1980 by two principals. Larus is located in a 30,000 square foot facility in the heart of Silicon Valley in San Jose CA. Larus employs 44 people and has a direct sales and marketing team of 10 people. Larus designs, manufactures and markets its own proprietary communications products. Larus manufactures network synchronization and timing products used to synchronize private and to a lesser extent public communications networks. Larus' products access and distribute highly accurate time signals from satellite global positioning systems and rubidium oscillators. The market for these products is global in nature and totals several hundred million dollars annually. Larus competes in this market with one much larger and one equal sized domestic competitor and one larger European competitor. Larus' products are sold in the North American market with some small amount of sales into Asia and Europe. Their products are predominantly used in private customer premises networks, although they have recently completed development of certain products suitable for large public carrier networks. Based upon year to date shipments ending June 30 and booking trends, Larus' sales for Fiscal Year 2004 beginning December 1, 2003 are tracking to $6 million. The company has been historically profitable and would have likely been profitable for their full 2004 Fiscal Year. The purchase price net of cash in the company totaled $5,800,000. Larus had approximately $1.1 million in cash and cash equivalents at the time of closing. The purchase price included $1 million in cash, and a $887,000 short term note and a $3 million six year note. MicroTel will lease Larus' facility from the two principals who own the facility for seven years and pay a lease premium over the period of $750,000. The principals also received 1,200,000 shares of MicroTel's restricted common stock valued at .824 cents per share or $1 million in value, subject to a three-year lock-up. Lastly, the principals received a three-year warrant to purchase 150,000 shares of MicroTel's restricted common shares at a conversion price of $1.30. Commenting on the acquisition, Graham Jefferies, executive vice president and chief operating officer of the Telcom Group stated: "We are most fortunate to have acquired Larus as the synergy with both our Communications Segment and our defense and aerospace Components Segment represent an extraordinary opportunity. We will combine our CXR Telcom subsidiary which is located nearby with Larus in the Larus facility at significant facility and administration cost savings. Larus has recently developed innovative timing solutions for large public carriers such as the Regional Bell Operating Companies and other large public carriers both here and in Europe and Asia. While this is a major new and exciting market opportunity for Larus, Larus lacks the years of history and large installed product base that our network access and transmission products and test instrument subsidiaries have with large public carriers. Also, Larus lacks the local infrastructure to capitalize on these opportunities in Asia and Europe where we have a direct presence on both continents. Where Larus helps us is with their much larger sales and marketing staff here in the U.S. to support our French-based CXR Anderson Jacobson (CXR-AJ) customer premises network access products. And lastly, our defense and aerospace subsidiary XET Corporation with its various subsidiaries can assist Larus penetrate military markets in North America as well as Europe and Asia. The acquisition of Larus will be a boost to our CXR-AJ French subsidiary which has struggled to penetrate the North American market lacking as it does a meaningful U.S. presence. The combined entity will also be much better positioned to capitalize on our newly introduced Voice and TDM (Time Division Multiplexing) over IP product which is starting to sell in Europe. However, it is off to a slow start in the U.S. due to CXR-AJ's limited sales and marketing presence in the U.S. At the engineering level CXR-AJ's much larger staff will be available to accelerate Larus' new product development. We believe MicroTel is very well positioned to accelerate Larus' profitable growth of not only its historical customer premise product, but also its new public carrier products." Carmine T. Oliva, chairman, president and CEO stated: "We have hired a high level seasoned executive to run the combined CXR Larus operation and with this new executive on board we are well positioned to add other future acquisitions to the combined entity. With our investment banker OEM Capital's assistance we looked long and hard to identify Larus. The operational and geographical synergy with our operations is so outstanding we believe it would have taken two or more acquisitions to equal it among other acquisitions we considered as alternatives. Most importantly Larus will be highly accretive of our earnings and will contribute significantly to our earnings per share. Since the Larus acquisition entered its closing stages OEM Capital has been directing its efforts to identifying suitable acquisitions in the U.S. that would give us a presence to support our defense and aerospace power supply subsidiary XCEL Power System Ltd. located in England and Wales. Over a ten-year period ending in August 2000 we completed eleven acquisitions and seven divestments for an average of 1.5 transactions per year. Fortunately, we now have no divestment requirements to divert our time and attention, so we are hoping to complete acquisitions at the rate of one every 9 months. We entered 2004 with an acquisition pending in Germany for our defense and aerospace Electronic Components business segment almost complete. Unfortunately, at the eleventh hour the seller stalled and we believe accepted a compelling all cash offer from a German company. This delayed completion of our first acquisition in 2004 for six months until the closing with Larus. What we are trying to achieve now is a second acquisition by year end 2004 or early 2005." About MicroTel MicroTel International Inc. is a multi national manufacturer of defense and aerospace electronic components and subsystems and communication equipment. Our electronic components group, which includes XET Corporation and its international subsidiaries, provides custom power conversion products, digital and rotary switches and subsystem assemblies to the global electronic components market and are primarily used for defense, aerospace and industrial applications. Our communications group, consisting of CXR Larus Corporation and CXR Anderson Jacobson, provides network access, transmission and test equipment to the North American, European and Asian communications industry. Founded in 1983, MicroTel operates out of facilities in the United States, United Kingdom, France and Japan. As of July 14th 2004, we had a total of 225 employees in our various subsidiaries and divisions. Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995 With the exception of historical information, the matters discussed in this press release are forward-looking statements that involve a number of risks and uncertainties. The actual future results of MicroTel could differ from those statements. Factors that could cause or contribute to such differences include, but are not limited to, to realize, from Larus operations, $7,000,000 in sales, $1,000,000 in net income and $0.04 per share in the twelve months looking forward, to realize $6,000,000 in revenue from sales generated by Larus in the twelve month period ending November 30, 2004 to benefit from synergies of Larus with both MicroTel's communications equipment and electronic components segment, the combining of CXR Telcom and Larus, the positive impact Larus will have on CXR-AJ and the ability of Larus to help capitalize on the Voice over IP TDM, the ability of Larus to grow its historical CPE product and new public carrier products, the result of MicroTel being better positioned to add other acquisitions in the future, the ability of the Larus acquisition to be highly accretive to earnings and contribute significantly to MicroTel's earnings per share, the ability of MicroTel to complete an acquisition in the U.S. that provides a presence to support the aerospace power supply subsidiary XCEL Power Systems, Ltd. located in England and Wales and those factors contained in the "Risk Factors" Section of the Company's Form 10-K for the year ended December 31, 2003. |
