Electro Optic Systems Holdings (ASX: EOS) has advanced its proposed acquisition of MARSS, revising transaction terms and announcing significant new orders including a £85m contract.
Receipt by MARSS vendors and completion of the deal are expected in the coming days, though timing is not guaranteed.
The maximum earnout cap for the acquisition has been increased to €140m, up from the previous €100m, reflecting MARSS's strengthened commercial outlook and recent order successes.
EOS has drawn A$70m from its term loan facility, with A$50m allocated to the US$36m upfront cash consideration for the MARSS acquisition.
MARSS Secures Major Contract
MARSS secured new orders in May 2026 totalling €102m from an existing Middle East customer.
Furthermore, a new £85m (A$160m) agreement with an existing Middle Eastern military customer was finalised.
This substantial contract is for country-wide drone detection and mitigation using MARSS's NiDAR C2 system.
It is expected to be substantially implemented during 2026-2027, with approximately 70% of the revenue and cash flow anticipated in that period.
As at 15 May 2026, MARSS's order book stands at €135m (approximately A$217m), which would increase EOS's total order book from US$509m to US$726m post-completion of the acquisition.
Earnout Structure and Requirements
The revised maximum earnout cap now stands at €140m.
To achieve this maximum earnout, MARSS is required to secure €700m in new order intake during the 12-month earnout assessment period, which commences 12 January 2026 and runs for 12 months after completion.
The earnout payment structure has also been amended.
It will now be made in three tranches (at 90 days, 270 days, and the end of the earnout period), payable partly in EOS shares and partly in cash, based on specific performance rights.
While the enhanced earnout cap signals confidence in MARSS's growth potential, investors should watch for the conversion of the combined company's substantial order backlog into revenue and the impact on profitability, following a challenging FY25 performance.
Backlog and Profitability
In its FY25 annual report, EOS reported a significant increase in its secured and unconditional contracted future work backlog, reaching approximately $459.1m at 31 December 2025, compared to $135.6m in 2024.
Most of this backlog is expected to convert into revenue during 2026 and 2027.
Despite the improved backlog, EOS's continuing operations revenue fell to $128.5m in FY25, and the operating loss before tax from continuing operations widened to $79.0m.
