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David Fawcett, MA, CFADavid Fawcett, MA, CFA

Founder of Epic Capital ManagementFounder of Epic Capital Management

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David Fawcett, MA, CFADavid Fawcett, MA, CFA • 2nd • 2nd Founder of Epic Capital ManagementFounder of Epic Capital Management 6h •

6 hours ago

 

 

 

Kraken Robotics Musing:
Is Their Significant Growth Potential Making Them a Takeover Target?

This week, Anduril announced plans to build a high-volume manufacturing facility for their autonomous underwater vehicles (AUVs). Kraken has historically supplied Anduril with batteries for these AUVs. The new plant, with a capacity of 200 subs per year, is scheduled to open in Sept. 2025. This development presents a significant revenue opportunity for Kraken, as each AUV requires approximately $1-3 mln worth of Kraken batteries. Even at the low end of the range this translates to an annual revenue potential of $200 mln for this program alone. For context, Kraken is forecasting $100 mln in total revenue for this year.

Anduril’s reliance on Kraken batteries extends beyond regular AUVs. Anduril is currently constructing 3 extra-large AUVs, known as the Ghost Shark, for the Australian Department of Defense. If these prototypes perform as expected, the program will also move to large-scale manufacturing. Each XL-AUV requires about $10 mln worth of Kraken batteries, presenting a similar $200 mln annual revenue potential for Kraken in this segment at scale.

These opportunities raise an intriguing question: Would Anduril consider acquiring Kraken to secure supply and save on margins? Anduril has a history of strategic acquisitions, including:

Area-I: Tactically Integrated Unmanned System
Copious Imaging: Wide-Area Infrared Sensing
Dive Technologies : Autonomous Underwater Vehicle
Adranos Energetics : Solid Rocket Motors
Blue Force Technologies : Autonomous Air Vehicle

In a recent blog by Packy McCormick titled “Anduril: Acquiring Prime, Analyzing Anduril's M&A Strategy and the Future of Defense,” insights into Anduril's M&A strategy were shared. Steckman, Anduril’s CRO, mentioned that Anduril asks two key questions for all organic product development and acquisitions: “Is the problem urgent and can we solve it in less than 5 years?”

With Anduril’s plan to start high-volume production of their AUV next fall, and their goal of achieving high-volume production for their XL-AUV, the timing appears opportune. However, whether an acquisition is necessary depends on how much emphasis Anduril places on securing supply and saving on Kraken’s profit margins. We believe this consideration is indeed worthy of serious thought.

If Kraken were to be considered for acquisition, it's likely that other industry players would also show interest. For instance, HII uses Kraken's Synthetic Aperture Sonar for their unmanned underwater vehicles (UUVs), which range in price from $300k to $700k per UUV.
In October, HII announced a contract to build nine UUVs, with potential growth to 200 vehicles, which represents a $60 mln opportunity for Kraken. It's worth noting that HII purchased Hydroid in 2020 for their REMUS line of UUVs, demonstrating their ongoing interest in this sector. The purchase was at 25X EV/EBITDA or 2.5X the current valuation of Kraken.

hashtag#Anduril hashtag#technology

 

 

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