Lidar makers Ouster and Velodyne complete merger, creating industry powerhouse

Lidar manufacturers Expulsion And Velodyne said on Monday that they had achieved a “merger of equals”, creating a lidar powerhouse.

The combined company will have more than 850 current customers, an extensive patent portfolio and approximately $315 million in cash, based on year-end numbers. This liquidity is essential in a market where it has become much more difficult for companies that are not yet profitable to raise much-needed funds.

It will retain the Ouster name and continue to trade under that company’s ticker symbol, “OUST”. Shares of Ouster were down 15% in the early afternoon after the news broke, as investors digested the dilution that will result from the all-stock deal. Velodyne shareholders voted to approve the deal on Friday.

Lidar, short for “light detection and ranging”, is a sensor technology that uses infrared lasers to create a detailed 3D map of the sensor’s surroundings. Lidar units are used in a variety of robotic applications. Of particular interest to investors, lidar sensors are considered important components of nearly every autonomous driving system currently under development.

Investor interest in the potential of autonomous vehicles has led many lidar startups to go public in recent years. But valuations have fallen sharply over the past year as investor enthusiasm cooled and some automakers cut spending on self-driving programs in favor of driver-assist technology. more limited.

These developments have helped set the stage for consolidation in the lidar space, Ouster CEO Angus Pacala said when the deal was first announced.

Pacala, who will lead the combined company, told CNBC in an interview Monday that the merger is “a major step toward profitability for Ouster.”

Ouster’s products have posted positive gross margins for some time, meaning they sell for more than it costs to make them. Pacala noted that after recent changes to Velodyne’s contract manufacturing agreements, that company’s gross margins have also turned positive.

“It’s huge for the merger and for the strength of the combined business,” Pacala said. “Not only are we increasing the revenue base of both companies by merging, but it’s a positive margin.”

In November, when the merger was first announced, the companies said they expected annual savings of around $75 million that could be realized within the first nine months of closing the deal. . Pacala said he now expects total savings to be a bit higher – but, he noted, this will come at a cost: the merged company will cut between 100 and 200 jobs, he said. he stated, primarily in operational roles where the two companies overlap considerably. .

Ouster will have about 350 employees once the two companies are integrated, Pacala said.

Some of this integration has already taken place in the executive suite. Velodyne CEO Ted Tewksbury will chair the combined company’s board of directors, and its chief financial officer, Mark Weinswig, will retain that role with Ouster, while Ouster co-founder Mark Frichtl will serve as CEO. chief technology officer of the combined company.

But Pacala said the merged company has no plans to combine manufacturing.

“The makers of Velodyne with Fabrinet in Thailand, about an hour and a half from Reference manufacturing facility that Ouster uses,” he said. “We intend to continue working with both partners.”

Ouster said it will provide a “full update” on its integration plans when it presents its fourth quarter results on March 23. revenue and gross margin forecasts. Velodyne exceeded its fourth quarter billing and revenue targets, Ouster said.

Velodyne shareholders can expect to receive 0.8204 shares of Ouster for each Velodyne share they own, representing a premium of approximately 7.8% based on the respective companies’ stock prices when the he deal was first announced in November.