Orbital Sciences Corp. agreed Monday to acquire Magellan Systems--a leader in the fast-growing consumer market for satellite receivers that tell hikers and sportsmen where they are--in a stock deal valued at $55 million.
The deal opens potentially lucrative opportunities for San Dimas-based Magellan to start producing and marketing two-way personal pagers that would be part of a global communications system Orbital is developing for $150 million.
Magellan now produces hand-held devices, priced as low as $400, that use signals from the Pentagon's constellation of Global Positioning System (GPS) satellites to determine the user's geographic location by longitude and latitude.
Magellan this year will produce 100,000 of the devices--a doubling of last year's volume and a measure of just how rapidly GPS systems are moving into the consumer market. According to Magellan President Randy Hoffman, the company's acquisition by Orbital, based in Dulles, Va., will both hasten development of new positioning products and stimulate sales in the market for pager products.
Magellan expects its work force of 150 to expand by at least 15% annually--not large by Southern California standards but part of an important trend in small, high-tech companies that dot the region's industrial landscape.
California firms dominate the market for GPS devices, which are being used increasingly in navigation systems for automobiles, trucks and airlines. Eventually, the devices will be linked to laptop computers, pagers and mobile telephones.
The acquisition has already been approved by Orbital's board and does not require a shareholders' vote, a spokeswoman said.
The transaction is expected to be completed next month. About 2.6 million Orbital shares will be issued for Magellan, and a further 400,000 shares will be set aside for stock options already held by Magellan officers and employees. Orbital's stock closed Monday at $19.125 a share, off 62.5 cents, in Nasdaq trading.
Magellan, founded in 1987, is a privately held firm whose stock is largely owned by venture capitalists.
Orbital, which specializes in low-cost space systems, expects to launch the first two satellites for its Orbcomm pager system in January, and to have a complete network of 28 satellites in place within about two years.
With the Magellan deal, Orbital hopes to capture 20% of the consumer market for pagers that will use its new system, said Orbital Chairman David Thompson.
Within the next year Magellan will have to consider expanding its production capacity, though both Hoffman and Thompson said it would be "premature" to say in what state the expansion might occur.