Beijer Electronics' Automation will be granted the distribution rights for the business area of Mitsubishi Electric's Danish and Baltic agencies, and those that it does not already have in Finland. These territories are expected to bring Automation sales of some SEK 100 m in 2008. As a part of the deal, Mitsubishi Electric is acquiring 15 per cent of the Automation business area for some SEK 45 m.
Commenting on the transaction, Göran Sigfridsson, Beijer Electronics' CEO and President said: "This deal with Mitsubishi Electric is a promising initiative that gives us a far bigger market to address, creating better prospects for Automation's future expansion. It simultaneously ensures additional security for the business area through our intensified collaboration with Mitsubishi Electric."
Creating more scope for growth within Automation across Scandinavia and neighbouring markets provides the background to this deal. Beijer Electronics has been an agent for Mitsubishi Electric's Automation equipment product range in Sweden, Norway and Finland for nearly 25 years. Proceeding from these territories, Beijer Electronics has built a business in this segment that is one of the region's leaders.
The Automation business area has an estimated market share of 15 per cent-plus on the markets it currently services. Automation's sales were SEK 371 m, with operating profit of SEK 29.6 m in 2005. Mitsubishi Electric products represented some 60 per cent of sales. By Automation, being granted the expansion of territories, Mitsubishi Electric sees an opportunity to further advance its market position as a vendor throughout the region.
The process of enhancing the distribution and sales in each country will take some time and necessitate some investment. The intention of Automation is to expand the business on the basis of the existing local distribution network. The new territories are expected to generate a progressive pay-off, adding some SEK 100 m to sales in 2008. In the first two years, the business area as a whole is expected to generate somewhat lower operating margins.
As a part of the deal, Mitsubishi Electric is acquiring 15 per cent of Automation and will have one board member in the new subsidiary. The purchase price will be some SEK 45 m, generating a non-recurring gain of some SEK 40 m for Beijer Electronics after the costs attributable to the deal. This transaction, scheduled for completion during the fourth-quarter 2006, was preceded by a new structure for the Beijer Electronics group. Parent company Beijer Electronics AB has been re-structured into a holding company with holdings in two subsidiaries-Beijer Electronics Automation AB and Beijer Electronics Products AB. The transaction is estimated to exert a positive influence on the group with about SEK 6 per share after taxes and minority in 2006; effects on corresponding earnings per share are expected to be marginal in 2007.