Two of the world’s top makers of industrial sensors are set to merge in an $8 billion transaction announced today. 

Thousand Oaks, California-based Teledyne Technologies Inc. said this morning that it has entered an agreement to acquire Flir Systems Inc. for $56 per share. The price represents a 40% premium over Flir’s volume-weighted average stock price over the 30 days ended Dec. 31. Teledyne will pay the $8 billion deal value in a combination of cash and stock, with the help of a $4.5 billion line of credit it took out to finance the transaction.

Teledyne and Flir make sensing devices such as thermal cameras that are implemented in a large assortment of systems, collectively part of the so-called “internet of things.” Teledyne’s hardware can be found inside devices ranging from industrial cameras used by manufacturers to track their production lines to dental X-ray machines and satellites. Flir, too, makes sensors for a wide variety of applications, mainly in the industrial and defense sectors.

Teledyne anticipates that the deal will be immediately accretive to its earnings after the transaction’s expected completion in mid-2021. Flir generated a gross profit of $228.9 million in the third quarter on revenues of $466.4 million. Teledyne, for its part, reported revenues of $749 million in its most recent earnings call.

The industrial market, which accounts the bulk of Flir’s sales and is a core revenue source for Teledyne as well, is undergoing major changes. New sensors are entering the market that not only collect data about the environment but can also help process that data with integrated artificial intelligence chips. At the competitive level, meanwhile, the segment is becoming more crowded: Amazon Web Services Inc. recently introduced Amazon Monitron, a service that provides sensors and cloud analytics features to help industrial companies monitor their equipment.

By joining forces, Teledyne and Flir will gain additional scale that should put them in a better position to address market changes.

The acquisition is the latest in a series of high-profile deals involving sensor suppliers. Several well-funded startups that make lidar sensors for autonomous vehicles have in recent months announced plans to go public via so-called SPAC mergers. A SPAC merger is a transaction wherein a startup looking to list its shares joins forces with a so-called special purpose acquisition company, an entity created specifically to merge with another firm and take that firm public. 

Photo: Flir Systems