By Joseph White and Yuvraj Malik
(Reuters) - Lidar companies Ouster Inc and Velodyne Lidar Inc have agreed an all-share merger that steps up consolidation in search of profitability in autonomous vehicle technology.
Velodyne and Ouster compete in precision sensors that enable self-driving vehicles to see the world around them. Both companies have been hit hard as timetables for large-scale autonomous vehicle deployment have stretched out.
Ouster shares have lost 77% of their value since Jan. 1 and Velodyne was down 80% this year before Monday's merger announcement.
"There need to be financially strong companies in this space," Ouster Chief Executive Angus Pacala told Reuters on Monday. "Necessary consolidation is happening."
Lidar sensors are being used increasingly in vehicles for the sophisticated environment mapping required for autonomous driving capabilities and safety. Demand for the technology is expected to rise sharply as more vehicles use lidar to enable hands-free driving systems that stop short of full autonomy.
"The outlook for lidar technology is incredibly bright," said Pacala, who will become CEO of the merged company while Velodyne chief Ted Tewksbury will become executive chairman.
A name for the new company will be announced later, Pacala said.
The deal will form a company with a combined market capitalization of about $400 million.
Ouster and Velodyne had a combined cash balance of about $355 million at Sept. 30 and aim to realize annualized cost savings of at least $75 million within nine months of closing the proposed merger, they said in a statement.
"We do have a lot of overlapping areas," Pacala said. "We are looking to build a faster track to profitability."
Velodyne shares were up 5.6% while Ouster rose about 1% in premarket trading.
The combined business will be split 50-50 between the two companies' existing shareholders.
Velodyne stockholders receive 0.8204 shares of Ouster for each share held, representing a 7.8% premium to Velodyne's closing price on Friday.
Barclays (LON:BARC) and Latham & Watkins served as advisers to Ouster, while BofA Securities and Skadden, Arps, Slate, Meagher & Flom LLP advised Velodyne.