NEWMARKET, Ontario—AirBoss of America Corp. is growing again, this time through a merger that will create a new business called AirBoss Defense Group.
The company has entered into an agreement to merge its defense business and other operations in Acton Vale, Quebec, with Critical Solutions International Inc., a privately owned Charleston, S.C.-based global supplier of route clearance vehicles, countermine and survivability products to U.S. and foreign military forces.
In a news release, AirBoss said it "will contribute the shares of AirBoss Engineered Products Inc. and the membership interests of Immediate Response Technologies L.L.C. (a Landover, Md.-based company acquired by AirBoss in July 2015) to newly formed Canadian and U.S. entities that will form AirBoss Defense Group." Critical Solutions Holdings Inc., the parent of CSI, will contribute all of the shares of CSI to the new business.
AirBoss said in the statement that its contribution is valued at $100 million while CSH's share is valued at $32.7 million. In consideration, AirBoss will receive 55 percent of the equity in AirBoss Defense Group and $60 million, and CSH will hold 45 percent of the equity interest in the new business. The $60 million is anticipated to be in the form of a vendor take-back note at the closing of the transaction and to subsequently be refinanced with third party debt, the release said.
Closure of the transaction, which is subject to approval of the U.S. Committee on Foreign Investment and other regulatory agencies along with customary closing conditions, is expected during the second half of 2019.
Heading up AirBoss Defense Group as CEO will be Patrick Callahan, the current CEO of CSI, according to AirBoss President Lisa Swartzman.
She said that Heather Miller, chief strategy officer at CSI, will continue in the same capacity for AirBoss Defense Group, while Chris Bitsakakis, the chief operating officer of AirBoss, will be COO of the newly formed business.
"The positive momentum in the U.S. and international defense markets supports the timing of this transaction," Callahan said. "By integrating the product innovation and advanced manufacturing capabilities of the AirBoss Defense business with the global business development strength of CSI, the newly launched AirBoss Defense Group will be well-positioned to deliver a full spectrum of survivability solutions to service members and first responders around the world."
Newmarket-headquartered AirBoss will continue to manage the production of military and first response products, including chemical, biological, radiological and nuclear boots, gloves, gas masks and decontamination shelters.
"We think (the merger) should help us build the business faster with a broader array of products," Swartzman said, adding that it creates a number of opportunities to diversify and build the defense business in a more focused way, "while also supporting accelerated additional investment in our wholly owned lines of business."
Longer term, she said, the versatile product manufacturer and custom rubber compounder expects "this dual-pronged approach to growth will yield better results than if we operated in our current structure."
Swartzman noted that the addition of CSI "gives us a major sales and marketing arm with boots currently on the ground." AirBoss would like to gain greater growth in the Middle East, and CSI is strong in that area
AirBoss "has a well-established reputation for industry leading capabilities in engineering, R&D, product development and manufacturing," said Gren Schoch, chairman and CEO of AirBoss. "Our commitment to developing innovative new products and solutions will be complemented by the sales, marketing and support capabilities CSI brings to the table.
"On closing (the transaction), we intend to identify additional potential synergies, consistent with our current focus on driving improved overall business across the organization."
Other possible strategic and financial benefits include the diversification of product offerings; significant cross-selling opportunities to a global customer base; and creation of improved financial flexibility to fund planned capital expenditures, target potential acquisitions, as well as to partially pay down debt, AirBoss said.