Acquisition of Feeney Wireless will boost MiFi maker’s IoT footprint
by: Mark Freeman 4.10.15
MiFi maker Novatel Wireless has acquired family-owned Internet of Things technology provider Feeney Wireless for $25 million in stock and cash – furthering the San Diego company’s strategy of bulking up though acquisitions.
Novatel, which announced the deal last week, said the total purchase price could rise to $50 million over the next four years if Feeney hits financial targets.
“This acquisition was not about cost saving,” said Novatel Chief Executive Alex Mashinsky in a conference call with Wall Street analysts. “It was about scaling up what Feeney does well and adding their products to our mix and our products to their mix. If anything, we are going to be adding more people to both companies.”
Based in Eugene, Ore., Feeney has 91 employees. Novatel employs about 240 workers.
Last year, activist shareholders ousted Novatel’s longtime management as the maker of the popular MiFi mobile hot spot struggled with mounting losses in the wake of low-price competition.
Novatel’s sales plunged from $335 million in 2013 to $185 million last year. New executives aim to orchestrate a rebound in part through acquiring firms in the Internet of Things market, which is expected to surge to $300 billion in component sales by 2020, according to Gartner Research.
Founded in 1999, Feeney Wireless has 1,000 customers and 220,000 connected Internet of Things devices deployed. They range from digital signs to vending machines. Customers include Dr. Scholl’s, which uses automated kiosks in retail stores to take measurements for shoe inserts.
Feeney is expected to generate $38 million in revenue this year, said Michael Newman, Novatel’s chief financial officer. The deal will boost Novatel’s earnings by $3 million this year, excluding taxes, depreciation, amortization and interest. The buyout doubles Novatel’s current Internet of Things revenue.
“This combination catapults both companies to a new level as we continue to build on our mission to simplify the complexity of the Internet of Things though complete end-to-end solutions,” said Bob Ralston, chairman of Feeney Wireless.
Novatel was particularly attracted to Feeney’s systems integration and services business, said Mashinsky. Up until now, Novatel has focused on selling Internet of Things connectivity devices in telematics and security markets. But it has stayed out of systems integration and network management.
“As we came across more (Internet of Things) projects where our customers requested us to both deploy and maintain the networks for them, we looked for someone who was already doing this exceptionally well,” said Mashinsky. “That is why putting these two together is such a good match.”
Novatel is paying $10 million in cash and $15 million in stock for Feeney. Billionaire Philip Falcone’s HC2 Holdings – a large Novatel shareholder – exercised $8.6 million in stock warrants to help fund the transaction. Falcone sits on Novatel’s board of directors and is founder of New York hedge fund Harbinger Capital.
Novatel’s shares ended trading Friday up 5 cents at $5.32 on the Nasdaq exchange. The stock has risen more than 60 percent so far this year.
