| Benchmark to Buy Pemstar in $300M Deal (Updated) |
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| Written by Mike Buetow | |||
| Tuesday, 17 October 2006 14:02 | |||
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ANGLETON, TX -- Benchmark Electronics said Tuesday it would buy Pemstar Inc. for about $300 million, including the assumption of debt. The deal is expected to close in the first quarter of 2007. Benchmark is the world's eighth largest EMS provider, with calendar 2005 sales of $2.26 billion. Pemstar is ranked 14th, with fiscal 2006 sales of $871 million. Under the deal, Pemstar common shareholders will receive 0.16 of a Benchmark share for each share held, Benchmark said. Based on Benchmark's closing price of $28.93 on Monday, the deal values Pemstar at $4.63 a share, a premium of about 27%. The combined company would have more than 13, 000 employees and 4 million sq. ft. of factory space spanning some 28 plants. The deal gives Benchmark some 400,000 additional sq. ft. in China, without incurring other incremental costs. Benchmark expects to realize $20 million a year in cost savings, primarily from greater capacity utilization. With the addition of Pemstar, Benchmark would remain the world's 8th largest EMS firm in revenues, more than $1 billion behind no. 7 Elcoteq. The deal prices Pemstar at about one-third of its annual revenues. However, Pemstar comes with roughly $125 million in debt (not including accounts payable) and lost a cumulative $5.7 million during the past four quarters. Some restructuring may likely be in order to eliminate manufacturing redundancies in Minnesota, Texas, Ireland, Sinagpore and Thailand, but overall minimal restructuring is expected, Deutsche Bank said. In a research note, Deutsche Bank analyst Carter Shoop said, "We believe Benchmark's acquisition of Pemstar makes good strategic sense. Given Benchmark's higher-level of customer satisfaction and stronger balance sheet and Pemstar's recent restructuring (limited excess capacity/needs to restructure), we view this as a favorable acquisition with limited downside risk." On a conference call Tuesday night, chief financial officer Gayla J. Delly confirmed that Benchmark expects its revenues and diluted earnings per share for the quarterly period ended Sept. 30 to meet or exceed analyst consensus.
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| Last Updated on Wednesday, 18 October 2006 11:01 |
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