Lidar corporations Ouster Inc and Velodyne Lidar Inc have agreed an all-share merger that steps up consolidation in search of profitability in autonomous car or truck technological innovation.

Velodyne and Ouster compete in precision sensors that allow self-driving autos to see the earth all over them. The two organizations have been hit challenging as timetables for substantial-scale autonomous car or truck deployment have stretched out.

Ouster shares have missing 77% of their price considering the fact that Jan. 1 and Velodyne was down 80% this yr before Monday’s merger announcement.

“There need to have to be economically sturdy corporations in this house,” Ouster Main Govt Angus Pacala explained to Reuters on Monday. “Necessary consolidation is occurring.”

Lidar sensors are staying employed significantly in motor vehicles for the innovative surroundings mapping needed for autonomous driving capabilities and safety. Demand from customers for the technologies is envisioned to rise sharply as additional cars use lidar to help arms-free of charge driving techniques that cease short of comprehensive autonomy.

“The outlook for lidar technological innovation is exceptionally shiny,” explained Pacala, who will turn into CEO of the merged corporation even though Velodyne chief Ted Tewksbury will turn into executive chairman.

A name for the new organization will be introduced later on, Pacala mentioned.

The offer will kind a corporation with a combined industry capitalization of about $400 million.

Ouster and Velodyne experienced a combined income equilibrium of about $355 million at Sept. 30 and purpose to understand annualized price tag discounts of at least $75 million inside nine months of closing the proposed merger, they mentioned in a statement.

“We do have a whole lot of overlapping parts,” Pacala mentioned. “We are looking to establish a quicker keep track of to profitability.”

Velodyne shares had been up 5.6% though Ouster rose about 1% in premarket trading.

The mixed organization will be break up 50-50 involving the two companies’ current shareholders.

Velodyne stockholders receive .8204 shares of Ouster for each share held, representing a 7.8% premium to Velodyne’s closing selling price on Friday.

Barclays and Latham & Watkins served as advisers to Ouster, although BofA Securities and Skadden, Arps, Slate, Meagher & Flom LLP recommended Velodyne.