Vector Intersect Buys Cyalume

Special purpose acquisition company Vector Intersect Security Acquisition Corp. will acquire Cyalume Technologies.

Vector Intersect Security Acquisition Corp., a special purpose acquisition company (SPAC), will acquire Cyalume Technologies, a safety and training products company serving military clients based in Massachusetts, after 90% of its shareholders voted in favor of the deal. The deal marks an aberration as of late, as SPAC shareholders have been killing deals to recoup cash in an uncertain-at-best secondary market.

Further, the deal serves as a template for SPAC management teams and investors who remain committed to a deal: several individuals associated with Vector Intersect Security upped their stakes in the SPAC this month, according to filings submitted to the Securities and Exchange Commission.

Yaron Eitan, who led Vector Intersect as its chief executive, resigned December 19, paving the way for Derek Dunaway, the target's CEO, to assume that role now that Cyalume will be brought public. Michael Bielonko, who was Cyalume's financial chief prior to the deal's approval, will continue in that role as the company is brought public.

"We continue to see a very strong market for our products despite the economic slowdown, and this merger provides us with financial flexibility," Dunaway said.

The deal calls for the acquirer to pay about $70.9 million, including $40 million to cover Cyalume's indebtedness, and its relinquishing of 6.4 million shares to GMS Acquisition Partner Holdings members, one of the shareholders in the SPAC.

Also on December 19, Jason Epstein, Daniel Gaspar, Frank Kline, Yair Shamir and Gen. (Ret.) Jack Keane were elected directors of the company. Eitan, who left his role as president as well, was appointed vice chairman of the board.

Shortly after their elections, Epstein and Gaspar, as well as Eitan, Andrew Intrater and Winston J. Churchill increased holdings in Vector Intersect Security through their associated investment vehicles.

Rodman & Renshaw originated the transaction for and served as the financial advisor to Vector Intersect Security. Loeb & Loeb and Greenberg Traurig have served as legal advisors for the SPAC.

Cyalume also has operations in France. It provides chemiluminescent lighting for US, NATO and Middle Eastern nations to use in emergencies including blackouts, disasters and acts of terrorism.

As of late, there has been reason for SPAC investors to cheer their asset class. Vector Intersect Security Acquisition Corp. closed a deal to buy Cyalume Tech, a rarity as many SPAC shareholders-primarily hedge funds-are killing deals to recoup cash.

Further, the Toronto Stock Exchange just opened its doors to blank check companies, after a lengthy process that ultimately resulted in a policy shift to create an opportunity for SPACs to list there. Restrictions pertaining to when negotiations with targets and SPACs are more lax than those in the US, which could aid the asset class' expansion on the TSX should failed SPAC investors turn to that market with their cash.

SPACs in Toronto cannot assume debt until after a deal is completed, and any deal a blank check executes with a target-or targets, SPACs can buy as many companies as they can appease shareholders-must use up 80% of its cash. However, that remaining 20% in cash can be used later to gather debt, potentially even opening the door to more M&A.

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