Freedom: Ultralife upside after acquisition announcement is almost exhausted

After a sharp rally, Ultralife (NASDAQ: ULBI) has nearly reached the price offered by the buyer, so the stock’s further upside is limited, says Freedom Broker analyst Vladimir Chernov. From $15.61 at the Oct. 28 close, the gain to the $16 deal price is about 2.5%.

Ultralife manufactures batteries, battery systems, and communications equipment for military and civilian customers. Its products are used in defense, healthcare, energy, and other industries.

EnerSys offered $16 per share

EnerSys (NYSE: ENS), a maker of energy storage systems for industrial, infrastructure, and defense applications, has agreed to acquire Ultralife for cash. The deal value, including net debt, is estimated at about $320 mln.

The $16-per-share offer implies a 166% premium to Ultralife’s Oct. 26 closing price, prior to the acquisition announcement. The terms were disclosed in an EnerSys statement. 

In trading on Oct. 28, Ultralife shares rose 145.4% to $15.61. EnerSys stock ended the session down 1.56%.

Further movement depends on deal closing

Chernov estimates that until the acquisition is completed, Ultralife’s price will most likely stay mainly within the $15.5–16 range. The gap between the market price and the buyer’s offer is small, and realizing it depends on the successful closing of the deal.

Closing is expected in Q1 2027. This requires regulatory approvals and the tender of a majority of Ultralife shares outstanding. After the merger is completed, the company’s shares will stop trading on the exchange. 

Chernov believes the main risk for investors is a possible failure of the acquisition due to regulatory constraints. Therefore, the remaining 2.5% to the offer price should not be viewed as guaranteed return.

The acquisition expands EnerSys’ defense business

For EnerSys, the acquisition looks promising due to rising demand for batteries for drones, counter-drone systems, and other military equipment, the analyst notes.

The company expects to achieve annual cost savings of $15–20 mln within the first 18 months after closing. Around the same period, the acquisition should begin to increase EnerSys’ adjusted earnings per share, excluding deal, integration, and other one-off costs. 

In Chernov’s view, the expansion of the defense order portfolio and confirmation of the expected merger impact could support a recovery in EnerSys shares in the medium term. However, the analyst expects a noticeable improvement in financial performance mainly in 2027–2028.

This is not an individual investment recommendation.