SCHAUMBURG, IL -- Sparton Corp.'s purchase of the contract manufacturing business of Delphi Medical Systems is being hailed as a smart, low-risk move by some analysts.

The all-cash transaction, valued at $8 million, is expected to close within 30 days and will be funded through existing cash reserves.

Delphi Medical Systems primarily manufacturers OEM medical devices for the therapeutic devices, such as blood separation equipment, spinal surgery products and 3-D eye mapping devices. It has projected annual revenue of $32 million, and no customer overlap with Sparton.

“The addition of this business meets the criteria of our growth strategy by providing expansion into the therapeutic device market and diversifying our customer base, while also expanding our geographic reach into the western United States,” said Cary Wood, Sparton president and CEO. “With a timely integration, we anticipate it will enhance Sparton’s overall profitability." He said the move would provide operational opportunities for Sparton's Defense and Security Systems  division, particularly with the environmental sensor business.

John Rolfe, cofounder of Argand Capital Advisors and portfolio manager of Candela Capital, called the deal "smartly structured to limit downside" to Sparton. "At $8 million, [it] represents little more than the net value of the existing inventory. There is zero overlap in Delphi's customer base with existing Sparton customers, and Sparton gains access to several new sales channels." The deal should return the contract electronics manufacturer to "an obvious growth trajectory," Rolfe said.

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