NYSE Lidar makers Ouster and Velodyne have agreed to merge, combining for about $400 million in market value. The companies said Monday they will join forces to increase their competitiveness in a market segment that has seen valuations fall as investors have become disenchanted with self-driving technology. Lidar, short for “light detection and ranging,” is a sensor technology that uses invisible lasers to create a highly detailed 3D map of the sensor’s surroundings. Lidar sensors are considered important components of almost all autonomous vehicle systems under development and are finding increasing applications with advanced driver assistance systems as well as in other areas of robotics. Strong investor interest in the potential of autonomous vehicles has led many lidar startups to go public in recent years. But valuations are now a fraction of what they were two years ago, and prominent automakers such as Ford Motor and Volkswagen have scaled back investments in autonomy in favor of more limited driver assistance systems. Under the deal, signed on Friday, Velodyne shareholders will receive 0.8204 Ouster shares for each Velodyne share they own – a premium of about 7.8% based on Friday’s closing prices for the two companies’ shares . Ouster founder and CEO Angus Pacala will lead the combined company, which does not yet have an official name. Velodyne CEO Ted Tewksbury, who joined the lidar maker last year, will chair the company’s board after the merger. “We all knew there was a need for consolidation in the market,” Pacala told CNBC. “This is us actually going out and doing it.” Pacala said the combined company would be a stronger competitor, with improved production, more than 170 patents and what he described as “complementary customer bases, partners and distribution channels.” The companies have identified about $75 million in savings that can be realized in the first nine months after the transaction closes, he said. The combined company will also be relatively fragile, critical in a market where it has become difficult for unprofitable startups to raise cash. Between them, Ouster and Velodyne had a combined $355 million in cash as of Sept. 30, Pacala said. Velodyne was an early pioneer in automotive lidar, developing its first sensor in 2007. Its distinctive “puck” sensors were seen on most early autonomous vehicle prototypes. But his first units, which cost $75,000 each and had delicate moving parts, were too expensive and fragile for use in mass-produced vehicles. Velodyne eventually managed to bring the cost of its sensors down to $4,000 while making them more robust. But as newer rivals with solid-state lidar sensors — including Ouster, founded in 2015 — entered the automotive space, the early leader fell behind. Velodyne still owns critical lidar patents and has not hesitated to enforce them. The company sued Ouster for patent infringement earlier this year and filed a related lawsuit before the US International Trade Commission seeking to block Ouster from importing its lidar units into the United States. (Ouster’s lidar units are manufactured in Thailand by contractor manufacturer Benchmark Electronics.) The companies will hold a joint webcast at 8:30 am. ET on Monday to discuss the merger. Ouster will report third-quarter results after the US markets close on Monday. Velodyne is scheduled to report results after the markets close on Tuesday.
