Amer Superconductor to buy Power Quality
WESTBOROUGH, Mass. --American Superconductor Corp., which makes products for electric utilities' power cables, said Wednesday it will buy Power Quality Systems Inc. for $3.8 million in stock.
Based in Pennsylvania, Power Quality offers reactive compensation products known as Static VAR Compensators, or "SVCs," which boost reliability of power transmission and distribution grids and improve the quality of power for manufacturing operations.
The acquisition is expected to close in April 2007.
Thyristor switches are the core of many power electronic-based reactive compensation products, including SVC systems. These systems are used to regulate and stabilize power grid voltage, which increases grid reliability and allows more power to be transmitted over existing power transmission lines.
American Superconductor said that by using Power Quality's thyristor switch, it expects to offer SVC systems that cost less initially as well as reduce energy and maintenance costs.
"PQS sales to date have been mostly limited to municipal and co-operative electric utilities and smaller industrial operations," said Greg Yurek, founder and chief executive of AMSC. "AMSC expects to utilize its worldwide sales force and business relationships with large electric utilities to accelerate the growth in sales of PQS's product line."
The company also said the deal will help it more effectively address larger-scale SVC order opportunities from utilities, the market for which is estimated at about $100 million per year.
AMSC said all key PQS engineering personnel are expected to remain with the company. The all-stock transaction also includes an earn-out opportunity with the potential for up to 475,000 additional shares to be issued to PQS's current owners if the company reaches certain order growth targets for existing PQS products for the fiscal years ending March 2008 and 2009.
For the 12 months ended Dec. 31, Power Quality posted a loss of $400,000 on sales of about $3 million. AMSC said it expects to increase sales of PQS's current product line by about 67 percent to $5 million for the fiscal year ending March 2008.
AMSC expects the acquisition to immediately add to earnings before interest, taxes, depreciation, amortization and stock-based compensation. For 2006, AMSC posted a loss of $30.9 million on sales of $50.9 million.
AMSC shares rose 11 cents to $13.18 in morning trading on the Nasdaq Stock Market.
