Comtech Telecommunications Corp., a Long Island maker of satellite ground stations and 911 systems, and Gilat Satellite Networks Ltd. have agreed to abort their planned half-billion-dollar merger and settle a lawsuit whose trial was scheduled to begin Monday.
Shares of Comtech soared on the news, closing Monday up 11.2% to $15.54. Gilat's stock also rose, closing up 1.9% to $5.31.
The $532.5 million merger between Comtech and Gilat, based in Petah Tikvah, Israel, was announced in January, but began to unravel in the following months as the COVID-19 pandemic slowed economic activity worldwide.
In Monday's settlement, Melville-based Comtech agreed to pay Gilat $70 million and both companies agreed to drop the lawsuit in the Delaware Court of Chancery.
"While we both believed from the outset that the merger of these two great companies was a perfect marriage, the COVID-19 pandemic made the timing of the combination particularly challenging," said a joint statement from Fred Kornberg, Comtech’s chairman and chief executive, and Dov Baharav, Gilat's chairman.
"We concluded, that under current conditions, the settlement is the best path forward for both companies and their respective stakeholders."
In the lawsuit, filed in July, Comtech contended that Gilat, a maker of systems for in-flight entertainment, had suffered a "material adverse effect" from the pandemic, triggering a provision that allowed the Long Island company to call off the merger.
The cash and stock deal had called for Comtech's headquarters to remain in Melville, while Gilat would have become an Israel-based subsidiary.
As of July 31, Comtech had 1,708 employees and contractors stationed in the United States, including about 150 in Melville. About 326 Comtech employees are based abroad.
In the quarter ended June 30, Gilat blamed the pandemic for delays in orders, resulting in revenue of $38.3 million, a sharp decline compared with the $59.7 million reported in the 2019 period.
In November, Comtech announced the acquisition of UHP Networks Inc., a maker of satellite ground station technology, for about $40 million.
Regulators have yet to render final approval in that deal.
Comtech posted net sales of $616.7 million for fiscal 2020 ended July 31.