Stock Alert: Comtech Telecom Up 7% After Terminating Merger Deal With Gilat

(RTTNews) - Shares of Comtech Telecommunications Corp. (CMTL) are gaining nearly 7% on Monday morning after the communication tech giant and Gilat Satellite Networks Ltd. (GILT) agreed to terminate their merger deal.

CMTL is currently trading at $14.92, up $0.95 or 6.80%, on the Nasdaq.

In connection with the termination and settlement agreement, Comtech has agreed to make a payment of $70 million to Gilat.

The settlement calls for dismissal of the litigation, with prejudice. The trial of the litigation which was scheduled to begin today in Delaware Chancery Court was accordingly cancelled.

Previously, Gilat had filed a counter lawsuit seeking enforcement of the merger or hundreds of millions of dollars in monetary damages following Comtech's filing of a complaint to terminate the merger.

Earlier, Comtech had filed a complaint seeking judgement to exempt it from the merger because Gilat suffered a "Material Adverse Effect"as a result of the Covid-19 pandemic.

However, Gilat strongly rejected all such allegations. Gilat believed that no Material Adverse Effect under the merger agreement has occurred and that Comtech's complaint is nothing more than an effort to avoid its clear contractual obligation to acquire Gilat, due to Comtech's own rapidly deteriorating performance.