Some analysts believe a DDi-Merix merger might have made more sense and deal is surprising as Viasystems worked hard to reduce U.S. exposure. U.S-based Merix struggled recently following own massive Asian acquisition.
Some people on Wall Street view the recent merge of long-time struggling printed circuit board (PCB) company Merix Corp. (Nasdaq: MERX) with PCB and EMS company Viasystems as having some resulting redundancies.
Particularly, given the current make up of the two companies, there is a heavy Asian automotive presence post merger.
In looking at North American PCB suppliers, the Merix-Viasystems merger can be viewed as neutral to positive for TTI Technologies (Nasdaq: TTMI), a North American PCB supplier that has competed less and less with Merix in recent years (except some PCB quickturn work).
TTI Technologies has also already taken market share at Juniper Networks (NASDAQ: JNPR) and Cisco Systems (NASDAQ: CSCO) and the Company only sees Viasystems when competing for backplanes in Asia.
On the positive side for TTI Technologies, “The industry could see some improvement in quickturn pricing and TTI could see modest share gains from a Merix shutdown”, says one Wall Street analyst.
Merger and PCB industry points of interest
Previously private Viasystems effectively goes public in this merger.
In this merger, Viasystems will own 80.5% of the combined company, with Merix sareholders 12.5% and convert holders approx.7% (convert holders receive $35 millionof cash, or one-half the convert plus the 1.4 million newly-issued shares).
The PCB consolidation deal is expected to close in 4Q09 and leave Viasystems management in charge. This is viewed as positive as Viasystems’ CEO David Sindelar is well-respected in industry).
Viasystems is primarily an Asian-based, low-end / high-volume PCB and backplane company (with some China-based quickturn and Mexican assembly capabilities).
Merix is a higher-layer count / quickturn player in the United States, and volume supplier in Asia to primarily automotive electronics customers.
Merix has struggled in recent years post its own massive Asian acquisition, and had been expected by many on Wall Street and in private equity to be sold eventually.
Based on the latest twelve month revenues for Merix and Viasytems, the combined entity will have roughly $840 million of revenue and $68 million in EBITDA.
Within the first 60 days of the deal closure, Viasystems is expected to realize $20 million in savings.
Only a few printed circuit board suppliers remain in North America. However, some analysts stated that, outside of the public listing for Viasystems as a result of the merger, the deal is still surprising as Viasystems had worked hard in recent years to reduce its exposure in the U.S.
Further, Viasystems increases its Asian footprint and automotive presence at what many believe is a poor time for the market.
Some on Wall Street believe California-based printed circuit board engineering and manufacturing services company DDi Corporation (NASDAQ: DDIC) might have made more sense as a merger target with its rather large quickturn business, no Asian facilities and solid management.
Analysts go on to say “A DDIC-MERX combination might also have been more logical as there is little overlap.”
VentureOutsource.com, October 2009
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