Makers Lidar Ouster and Velodyne agree to merge

The New York Stock Exchange welcomes Ouster Inc. (NYSE: OUST), today Friday, March 12, 2021, in celebration of its initial listing. To honor the occasion, Angus Bacala, CEO of Ouster, accompanied by Chris Taylor, Vice President of NYSE Listings and Services, rings in The Opening Bell® episode.

NYSE

Lidar Ouster and Velodyne agreed to merge, raising nearly $400 million in market value.

Companies said Monday they will join forces to increase their competitiveness in a market segment that has seen valuations drop sharply as investors grow disillusioned with autonomous vehicle technology.

Lidar, short for “light detection and ranging,” is a sensing technology that uses invisible lasers to create a highly detailed 3D map of the sensor’s oceans. Lidar sensors are critical components of nearly all autonomous vehicle systems currently under development, and are finding increasing applications with advanced driver assistance systems as well as other areas of robotics.

Investors’ keen interest in the possibilities of self-driving vehicles has led to several startup companies being rolled out to the public over the past few years. But ratings now are a fraction of what they were two years ago, and notable automakers included Ford Motor And the Volkswagen Cut back on investments in autonomy in favor of more limited driver assistance systems.

Under the deal signed Friday, Velodyne shareholders will receive 0.8204 shares of Ouster for every Velodyne share they own — a premium of about 7.8% based on Friday’s closing prices for the two companies’ shares.

Ouster’s founder and CEO, Angus Pacala, will lead the combined company, which does not yet have an official name. Velodyne CEO Ted Tuxbury, who joined lidar manufacturer last year, will chair the post-merger board of directors.

“We all knew there was a need for standardization in the market,” Bacala told CNBC. “This is we actually go out and do it.”

The combined company would be a formidable competitor, Bacala said, with streamlined manufacturing, more than 170 patents and what he described as “complementary customer bases, partners and distribution channels.”

He said the companies identified about $75 million in feasible savings in the first nine months after the deal closed.

The merged company will also be relatively streamlined, which is important in a market where it is becoming more difficult for unprofitable startups to raise money. Bacala said Auster and Velodine had a total of $355 million in cash as of September 30.

Velodyne was an early pioneer in Lidar Automotive, developing its first sensor in 2007. Distinctive “puck” sensors have been seen in most prototypes of self-driving vehicles. But its first units, which cost $75,000 each and contained precision moving parts, were too expensive and brittle to use in mass-produced vehicles.

Velodyne was eventually able to bring the cost of the puck sensors down to $4,000 while making them more powerful. But with newer solid-state sensor competitors — including the Ouster, which was founded in 2015 — entering the automotive field, the top leader has fallen behind.

Velodyne still owns important Lidar patents, and hasn’t hesitated to enforce them. The company sued Auster for patent infringement earlier this year, and has filed a related lawsuit with the US International Trade Commission seeking to prevent Auster from importing its lidar units into the United States. (Oster lidar units are manufactured in Thailand by contract manufacturer Benchmark Electronics.)

The companies will hold a joint webcast at 8:30 a.m. ET on Monday to discuss the merger. Oster will report its third-quarter results after US markets close on Monday. Velodyne is due to announce its results after markets close on Tuesday.

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