Beijer Electronics is acquiring Hitech Electronics of Taiwan, a transaction establishing the group as a global player in HMI (Human Machine Interface) products, while also bringing
the group a significant sales and profit contribution. Future synergies within extra sales, coordinating procurement and production, plus product development, are additional.
Beijer Electronics is making a strategic acquisition of Hitech Electronics of Taiwan, in its HMI Products business area. Hitech Electronics is a renowned player in the sector, with sales focused mainly on Asia. In 2004, the company had sales of SEK 118 m and has achieved good profitability, simultaneous with good growth. The founders and UK quoted company Densitron Technologies are selling 100 % of the shares.
"This acquisition of Hitech Electronics is a milestone in Beijer Electronics' history. The acquisition is important strategically, conferring us with an excellent platform to create long-term growth on the expanding Asian market," commented Göran Sigfridsson, Beijer Electronics' CEO.
"Hitech complements Beijer Electronics in geographical and product terms - the two companies have few overlaps, while the acquisition will generate major synergies in many areas."
Hitech Electronics was originally a family business founded in Taiwan in 1981. The company was a pioneer in the development of LCD (liquid crystal display) modules in the mid-1980s. At this time, Densitron of the UK became a partner, marketing the modules globally. Hitech developed its first operator terminal products based on its technical know-how of LCD modules in the early 1990s. Since then, the corporation has been successful in the Asian market. 2004, Hitech Electronics had a turnover of SEK 118 m and a net profit of SEK 17 m. The company has 88 employees.
Two Product Areas
At present, Hitech Electronics' operator terminals are its biggest segment, and constitutes around 60 % of total sales. This segment has a broad product range of proprietary terminals including graphic terminals, touch-screen terminals and other products. These terminals are intended for the Asian market, implying an extension of the group's total product range.
Hitech Electronics' terminal production is mainly the final assembly of units from subcontractors into finished products. The terminals are sold through a network of distributors, mainly in Asia, especially in Mainland China and Taiwan. The estimated market shares in Mainland China and Taiwan are somewhere between 15 and 20 %.
Sales in the LCD module product segment constituted about 40 % of total sales in 2004. Hitech has proprietary manufacture of monochrome displays, for external OEM customers, and its own operator terminals. Hitech's displays are normally modified to meet the customers' specific needs, and can be produced in any number the customers want. Some 80 % of sales are to Europe and the US, with customers including major US electronics corporations.
Synergies
The acquisition brings Beijer Electronics a strategic network of sales channels for the group's proprietary operator terminals on the high-growth Asian market. This means the group becoming a genuine global player in HMI products. Beijer Electronics' product range complements Hitech's at the high end of the Asian market. Simultaneously, Beijer Electronics will be able to sell Hitech's products through its sales channels on selected European and US markets.
Apart from extra sales through each company's sales resources, Beijer Electronics has also identified synergies in a series of segments. In the short term, synergy gains will be available by coordinating component procurement. In the slightly longer term, there are coordination gains available in development and production. Hitech's success is due to long experience of cost-efficient design and production on the price-sensitive Asian market.
Organizational and Financial Issues
Going forward, Hitech Electronics will continue to operate as an independent company within the HMI Products business area. Most of Hitech's management will remain with the company, supplemented by Beijer Electronics' management resources. Pro forma figures for 2004 indicate that Beijer Electronics including Hitech Electronics would have sales of some SEK 585 m and about 290 employees.
The acquisition cost will be about SEK 115 m and an additional cost corresponding to 50 % of Hitech Electronics' net profit 2005. The acquissition will be funded through internal reserves and bank borrowings. Hitech Electronics is scheduled for consolidation into Beijer Electronics' accounts from early April 2005 and onwards. The acquisition will exert a positive influence on Beijer Electronics' sales and earnings already during 2005.