ST. LOUIS -- Born of acquisitions and once the largest PWB company in the world, Viasystems Group today made a strong step toward the crown by agreeing to merge with Merix Corp.

The deal will create the largest US-based PWB manufacturer, with annual sales of about $840 million, although in terms of actual domestic production TTM remains the largest. The transaction is expected to be completed by the end of 2009.

Under the terms, each Merix share will be converted into approximately 0.11 newly issued shares of Viasystems, subject to adjustment, which will be publicly traded on Nasdaq. Approximately 98% of holders of Merix $70 million convertible senior subordinated notes due 2013 have agreed to enter into an exchange agreement whereby their notes will be exchanged for approximately 1.4 million newly issued Viasystems shares plus a total cash payment of approximately $35 million.

Following the merger transaction and note exchange, approximately 20 million newly issued Viasystems shares will be outstanding.

While technically a merger, Viasystems's current shareholders will end up owning 80.5% of the combined company, with existing Merix shareholders owning 12.5% and Merix convertible note holders at approximately 7%.

The combined company will have 13,000 employees and manufacturing capacity exceeding 4.3 million sq. ft. in China and 375,000 sq. ft. in North America. At closing, the combined company will have $40 million in cash, credit lines of more than $100 million (including a new $75 million line of credit from Wells Wachovia), and $215 million of outstanding debt (a reduction of approximately $80 million). The cash consideration will be financed by Viasystems’ existing cash on hand. The combined annual sales of $840 million would push Viasystems from No. 27 to No. 10 in the NTI Top 100 PWB fabricator rankings. 

Pro forma adjusted EBITDA for the past 12 months would have been approximately $68 million. Adjusted EBITDA is defined as operating income (loss) adjusted to exclude charges for depreciation, amortization, stock-based compensation, and restructuring and impairment costs. The companies expect annual cost synergies of approximately $20 million can be achieved through steps initiated within the first 60 days after of the transaction.

“Through this merger, we’re creating a world-class leader in PCB and related electro-mechanical solutions with complementary market segments, customers and manufacturing capabilities,” said Viasystems chief executive David Sindelar, in a statement. “The net result will be best-in-class PCB manufacturing on a global basis, combining Viasystems’ high volume and quick-turn capabilities in China with Merix’ quickturn and prototyping capabilities in the US. These assets along with Merix’ Asia factories will substantially increase our business scale and expand our customer base.”

Viasystems burst on the PWB scene in the late 1990s when, backed by the Wall Street equity group of Hicks, Muse, Tate and Furst it gobbled up several bare board fabricators, including the the PWB arms of Ericsson, Termbray Industries and Lucent (the former Richmond, VA, AT&T plant); Interconnection Systems Ltd.; Zincocelere; Forward Group; Mommers; Circo Craft; Kalex; plus several connector and EMS manufacturers. It later twice filed for bankruptcy.

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