Circuits Assembly Online Magazine - Features

CHICAGO, Nov. 17 -- EMS merger and acquisition activity rose in the third quarter, according to an investment bank that tracks the sector.

There were 14 M&A deals finalized in Q3, reports Lincoln Partners, a Chicago-based investment bank. This exceeds the 13 deals completed in the June quarter and 12 in the March quarter.

It was the most third-quarter transactions since 2000, when 28 deals were completed, Lincoln Partners said. There were 10 deals done in Q3 2003.

Companies of over $3 billion in annual revenues accounted for half the completed transactions. The other half were conducted by firms with revenues under $400 million, Lincoln Partners said.

Among the major deals:

Flextronics agreed to buy Nortel's manufacturing operations.
Creation Technologies acquired EMS firm Second Source System.
SigmaTron bought the remaining 57.5% of SMT Unlimited.
Celestica sold its Power Syetems business.
Neways Electronics acquired Stork Electronics.
Flextronics purchased Sheldahl, a maker of flex laminate and PCBs.

MILWAUKEE, Nov. 17 -- Perhaps the best-known analyst and proponent of the EMS sector on Wall Street is calling it quits. After 16 years of recommending stocks of contract assemblers, J. Keith Dunne is retiring at year-end to spend more time with his wife and young sons.

For the past three years Dunne has been a sell-side analyst with RBC Capital, an investment banking firm. He came to fame as a managing director of Robertson Stephens in the 1990s, a firm that fueled scores of high-tech companies and handled dozens of mergers and acquisitions. Robertson Stephens later collapsed and was sold.

Often cited by Wall Street publications for his accuracy, Dunne was in 2001 voted an Atomic Giant by PC FAB magazine (now PCD&M) in recognition of his influence on the industry.

In a statement today, Dunne said thanked the industry. "I immensely enjoyed watching the electronics manufacturing products and services industry take shape and am thankful for the opportunity I had to participate in its growth and development through strategic talks with many of you, and by educating investors on the investment merits of the EMPS industry."

Dunne gave a promising forecast for the future. "I believe the EMPS industry should continue to outperform the overall Nasdaq and a group of leading technology hardware companies for several more years.

Since Dunne initiated coverage in mid 1996:

Quarterly sales have grown from $4 billion to $15.2 billion, a CAGR of 36%.
Over 400 OEM asset divestitures and business acquisitions have been completed.
Market capitalization has increased from $6.5 billion to $30.5 billion, a CAGR of 20% vs. 7% for the Nasdaq..

Amit Daryanani will take over Dunne's practice at RBC.

RADFELD, Austria, Nov. 17 - A pair of leading semiconductor gear makers, BE Semiconductor Industries and Datacon Technology, will merge in January, the firms jointly announced today.

Besi will assume 100% of Datacon's shares. Datacon shareholders will receive 90% cash and shares in Besi. The purchase price was 3 million euros and includes net financial liabilities.

Negotiations are in the final stages, the companies said, and the merger is scheduled to close in January, pending antitrust and other reviews. Besi is listed on Nasdaq and Euronext. After the close, Datacon will become an wholly owned subsidiary of Besi.

Datacon makes microchip assembly platforms (die bonders), while Besia manufactures semiconductor assembly equipment.

Huntington Beach, CA, Nov. 17 -- SolderMask Inc. will become the first North American licensee of DEK's VectorGuard stencils.

Under the agreement, SolderMask will manufacture VectorGuard stencils from foil blanks supplied by DEK and will also provide complementary frames.

CHANDLER, Ariz., Nov. 8 — Microchip Technology, a provider of microcontroller and analog semiconductors, will in January convert its product packaging to lead-free plating, to comply with pending government regulations.

The company has selected matte tin as its plating material. The finish makes the company's products compatible with tin-lead soldering processes and higher-temperature lead-free processes.

The company has been shipping parts with matte tin plating in volume for over a year, Microchip said.

A number of semiconductor suppliers have announced plans to convert their line cards by the end of the first quarter 2005. See the story in the December issue of Circuits Assembly, coming soon.

MOORPARK, CA, Nov. 17 -- CTS Corp., a manufacturer of components and provider of electronics manufacturing services, will acquire SMTEK International in a cash and stock deal worth about $107 million.

CTS will pay between $14.20 and $15 per share, 75% in cash and 25% in CTS common stock, for SMTEK. CTS will also assume about $15 million in outstanding debt of SMTEK. Shares of SMTEK closed yesterday at $2.41 and the company's 52-week high is $7.50.

The acquisition is subject to shareholder approval and is expected to close in the first quarter 2005.

Upon completion of the deal, SMTEK will merge with CTS' EMS business unit, Interconnect Systems. The combination is expected to significantly expand the operational footprint, customer base, and capabilities of both businesses in the EMS market. The companies had combined revenues of about $625 million over the past 12 months.

In a press statement SMTEK chairman James Burgess said, "This acquisition ... recognizes [SMTEK's] achievement in emerging as a successful, effectively managed business with a strong competitive presence in the EMS industry. We feel the result will be significant business and financial benefits for both companies."

Elkhart, IN based CTS had revenues of $521 million over the past 12 months. SMTEK had sales of $102.4 million and operating earnings of $4 million

The companies will hold a conference call today at 1:30 p.m. Eastern: 800-762-6067 (480-629-9566, if calling from outside the U.S.). No access code is needed.