Kraken Robotics to acquire Covelya Group

Executive Summary

• Kraken Robotics Inc. has entered into a definitive agreement to acquire Covelya Group Ltd., a leading international provider of underwater technology solutions, for total consideration of $615 million.
• The transaction is funded via a combination of cash and equity, specifically $480 million in cash (financed through debt and a public offering) and $135 million in common shares issued to the seller.
• The acquisition positions Kraken as a major supplier of dual-use subsea technology, combining Kraken’s subsea batteries and sonar with Covelya’s navigation, positioning, and communication systems to create a comprehensive portfolio for defense and commercial maritime markets.

Key Details

• Transaction Structure: Acquisition of all issued and outstanding shares of Covelya Group Ltd. via subsidiary Kraken Robotic Systems Inc.
• Total Consideration: $615 million (excluding transaction costs and subject to adjustment).
• Payment Terms:
  • $480 million paid in cash.
  • $135 million satisfied through the issuance of common shares to the seller.
• Financing Details:
  • Public Offering: Bought deal public offering of 41,177,000 subscription receipts at $8.50 per receipt, generating approximately $350 million in gross proceeds.
  • Credit Facility: A new committed, secured, non-revolving term credit facility of $150 million (five-year term) and an amendment to the existing $35 million revolving credit facility (five-year term).
  • Use of Proceeds: Net proceeds from the offering and the credit facility are intended to partially finance the cash purchase price of the acquisition.
• Closing Conditions: Expected to close in the second quarter of 2026, subject to regulatory approvals (including TSX-V and foreign direct investment/merger control regulations) and customary conditions.
• Seller Equity: The seller is expected to own approximately 4% of the pro forma issued and outstanding common shares. Shares are subject to a lock-up agreement with one-third released at 12, 18, and 24 months from completion.
• Financial Impact & Synergies:
  • Combined Revenue (2025 Est.): $351 million to $379 million.
  • Combined Adjusted EBITDA Margin (2025 Est.): 24%.
  • Covelya 2025 Revenue Est.: $249 million to $275 million.
  • Covelya 2025 Adjusted EBITDA Est.: $60 million to $67 million.
  • Synergies: Targeting approximately $10 million in cost synergies within the first 24 months (supply chain, facilities, R&D, admin optimization).
  • Accretion: Expected to be immediately accretive, with low-to-mid-double-digit EPS accretion in 2027 after cost synergies.
  • Balance Sheet: Combined net leverage ratio of approximately 0.8 times at closing.
• Operational Metrics:
  • Combined Employees: Approximately 1,200 (including 790 technical staff).
  • Facilities: Over 450,000 square feet of production capacity globally.
  • Patents: Combined portfolio of over 110 patents (issued and pending).
• Kraken Standalone Guidance (Excluding Acquisition):
  • 2025 Revenue: $102 million to $104 million.
  • 2025 Adjusted EBITDA: $24 million to $26 million.
  • 2026 Revenue: $165 million to $175 million.
  • 2026 Adjusted EBITDA: $40 million to $50 million.
• Underwriters: Bank of Nova Scotia and Desjardins Capital Markets (lead bookrunners).
• Advisers: Scotiabank (financial adviser to Kraken), Gowling WLG (legal adviser to Kraken), Piper Sandler (financial adviser to Covelya), Osborne Clarke (legal adviser to Covelya).

Notable Quotes

• Greg Reid, President and CEO of Kraken: "Strategically, this acquisition will provide a unique opportunity to combine two leading subsea technology providers with complementary products, operating in markets with barriers to entry and high-growth potential... The combined company will be able to provide more integrated solutions of mission-critical systems for underwater platforms and subsea sensors/monitoring systems."
• Simon Partridge, Executive Chairman of Covelya: "For Covelya Group, we will be able to leverage Kraken's experience in the rapidly growing defence and maritime surveillance market while also enhancing our product and service-based offerings... As part of a larger and well-capitalized enterprise, we will have a greater ability to reinvest in developing new technologies."