Cobra Electronics to acquire Lowrance Electronics

Friday, January 5th 2001, 12:00 am

By: News On 6

(CHICAGO, IL) Cobra Electronics Corporation (Nasdaq: COBR) and Lowrance (Nasdaq: LEIX) Friday announced the signing of a definitive agreement under which Cobra will purchase all of the outstanding shares of common stock of Lowrance at $8.25 per share in cash. The acquisition brings together premier companies from the twoway mobile communications, SONAR, marine and recreational GPS businesses, combining their complementary products and customers and extending Cobra's global reach. The transaction values Lowrance at approximately $53 million, including the assumption of debt anticipated at the time of closing. The acquisition will significantly inerecsc Cobra's revenues as Lowrance's fiscal 2090 revenues exceeded $73 million.

Under the agreement, which has been approved by the boards of directors of both companies, Cobra will commence a tender offer no later than January 16, 2001 for all of the outstanding shares of Lowrance's common stock. Stockholders owning approximately 54.3 percent of Lowrance'soutstanding shares of common stock have entered into agreements to tender their shares pursuant to the tender offer.

The offer is subject to customary conditions, including the tender of at least 63 and 1/3 percent of Lowrance's outstanding shares of common stock. The tender offer is also conditioned on Cobra's obtaining adequate financing. Cobra has agreed to the terms of senior battle financing with LaSalle Bank, GE Capital and BT Commercial in the amount of $85 million. Cobra has also agreed to the terms of subordinated financing with American Capital Strategies in the amount of $15 million. The proceeds from financing will provide necessary funds for the transaction as well as refinance Cobra's existing working capital and letter of credit requirements. Both the senior bank and the subordinated financing are subject to negotiation and the execution of definitive agreements and other financing conditions. The financing transactions and the acquisition are anticipated to close in February 2001.

"This acquisition secures a leading position for Cobra in the marine and recreational Global Positioning System (GPS) and SONAR businesses, both of which provide significant, profitable growth opportunities," said Jim Bazet, president and chief executive officer of Cobra Electronics. "The acquisition offers us tremendous strategic growth opportunities in terms of new product development, distribution and manufacturing. It also positions us with superior technology in GPS, SONAR and navigational mapping software."

Cobra and Lowrance have each successfully positioned themselves in high-growth markets. Cobra is a strong number two player in the estimated $300 million Family Radio Service (FRS) business - one of the fastest growing segments of two-way mobile communications. Lowrance is a leader in the marine and recreational GPS market. Boaters and outdoor enthusiasts use GPS to determine location and navigation information based on satellite data. According to Allied Business Intelligence, the worldwide commercial GPS market, including the markets in which Lowrance participates, is expected to grow from an estimate of nearly $5 billion in 1999 to an estimate of nearly $14 billion in 2005, nearly tripling over the six year period.

The companies will also bring together leadership in complementary businesses. Cobra is the leader in the Citizens Band radio and radar detection markets. Lowrance is the number one player in the marine and recreational SONAR market. SONAR refers to the technology that detects bottom contours, depth and the presence of fish below water.

"The Lowrance acquisition supplements Cobra's strong internal growth and continues the momentum of our transformation. It fits with our growth strategies to aggressively expand internationally, extend domestic distribution channels, develop leadership positions in complementary
markets, and pursue strategic acquisitions," said Jim Bazet. For the first nine months of 2000, Cobra increased its sales by 19 percent and its net income by over 140 percent.

"Like Cobra, Lowrance has a 40-year track record of innovation and a reputation that stands for quality and technological leadership," said Darrell Lowrance, co-founder, president and chief executive officer of Lowrance. "The deal joins complementary companies, combines Lowrance's state-of-the-art technology with Cobra's superb marketing and distribution strengths, and secures resources for Lowrance's expansion."

Through the acquisition, Cobra will have access to new channels, such as original equipment manufacturers (OEMs), marine dealers and sporting goods stores. These channels will provide opportunity for cross-channel product sales and marketing. Cobra products are currently distributed through a strong, well-established network of approximately 300 retailers, including eight of the top ten consumer electronics retailers, the "Big Three" office supply super-stores, and mass market channels such as Wal-Mart, Kmart, Costco and Sam's Club. Additionally, the acquisition will expand Cobra's international presence from 33 to 60 foreign countries, with strengthened distribution in Canada, Europe and Australia.

The tender offer will he followed by a merger in which each share of Lowrance common stock not tendered through the offer will convert to a right to receive $8.25 in cash. After the merger, Lowrance will become a wholly owned subsidiary of Cobra.

"I am delighted that Darrell Lowrance and the entire senior management team will remain with the company," said Jim Bazet. "Together, we will leverage our combined innovation, technology and distribution strengths to build our global two-way mobile communications, SONAR and marine navigation and recreational GPS businesses."