Telular Acquires SkyBitz for $42 Million

Wireless alarm company Telular Corp. has agreed to buy trailer tracking supplier SkyBitz Corp. for a total of $42 million — $35 million in cash and $7 million in new Telular stock.

SkyBitz, based in Sterling, Va., is a major provider of tracking devices for trailers, containers and intermodal equipment, as well as construction and other heavy-duty vehicles. It also offers cargo sensors.

Telular provides Telguard, a wireless home and business security alarm system, and TankLink, a wireless product for monitoring liquid tank levels.

There will be little change to Telular and SkyBitz operations because they don’t compete directly with each other, said Homaira Akbari, who has been CEO and president of SkyBitz. Moving forward, she will remain president of SkyBitz.

“Organic growth is nice, but the reality is we need to be bigger, and to do that you either buy somebody or merge with somebody,” Akbari told Transport Topics.

“This deal offers Telular entrance into the transportation market, which is significant, but they are branching out into satellite communications as well,” said Mark Palmer, principal in Strategic Transportation Consultants LLC in Fayetteville, Ark.

This year, officials said, SkyBitz will generate $5 million before interest, depreciation and amortization on $35 million in sales. The purchase of SkyBitz will boost Telular’s revenue by 70% immediately, said Joe Beatty, Telular’s CEO.

SkyBitz will have 190,000 tracking devices placed with customers who pay monthly fees by year’s end, said Jonathan Charak, chief financial officer of Telular. And with only 13% of the 5.3 million trailers in the United States currently having tracking devices, the potential for added revenue is huge, he said.

SkyBitz could be a good complement to Telular’s fixed-point monitoring solutions, said Clem Driscoll, principal in consultancy C.J. Driscoll & Associates.

“As hardware costs continue to decline and technology continues to evolve, the transportation asset tracking market will expand . . . including both trailers and containers,” Driscoll said.

He said the installed base for tracking devices is 625,000 units. Of these, SkyBitz, Qualcomm Inc. and OnAsset Intelligence Inc. account for 80% of them, he said.

The tracking industry has grown about 10% this year, Driscoll noted.

While the market penetration for devices is only 10%, the main growth impediment is the $8 to $10 monthly fee for each unit, Driscoll said. For reefer containers and cargo, average charges could reach $20, Driscoll said.

Charak said there’s some opportunity for cross-selling to TankLink customers who have asked for mobile tracking services.

In early 2012, SkyBitz will embark on an expansion by doing business in the Middle East, Latin America and Asia, Akbari said. In September, SkyBitz won a contract to track the fleets of the Army Air Force Exchange Services and recently unveiled a sensor that monitors truck engines and notifies fleet managers of maintenance or repair issues, she said.

Akbari said Telular makes an ideal partner because both have little overlap or redundancies, which means no products have to be retired and no employees have to be laid off.

Under the terms of the deal, the cash portion will be funded by a $30 million, five-year loan from Silicon Valley Bank and $5 million from Telular’s cash reserves, according to Charak.

SkyBitz said 82% of its business is trailer tracking and the rest entails similar services for containers, intermodal equipment, construction and other heavy vehicles.

Telular said 80% of its customers buy its security product, and most of the rest are in the petroleum industry and want the company’s TankLink product.

SkyBitz’s former private equity owners are Garvin Hill Capital Partners LLC; Highstar Capital Fund I; Inverness Graham Investments; Motorola Ventures and ITV, a fund of Cordova Ventures.