TTM Technologies Inc.’s proposed $775 million buy of Anaren Inc. from affiliates of New York private equity firm Veritas Capital would bolster product offerings in the aerospace, defense and networking communications sectors while providing growth opportunities in the industrial, medical and automotive markets.
The East Syracuse-based manufacturer specializes in radio frequency technologies, considered essential building blocks of sensors used in radar, space-based and jamming systems, electronic warfare, wireless infrastructure, and base station applications.
Its highly integrated subsystems and components are in many cases custom-designed for such programs as the Navy’s next-generation integrated air and missile defense radar; the Space-Based Infrared System, which delivers timely, reliable and accurate missile warning and infrared surveillance to the U.S. military in one of the country’s highest-priority space programs; and the E2D Hawkeye surveillance aircraft, which is designed to help integrate advanced radar, data communication, and drone control in detecting and intercepting cruise missile launches.
“Many of these are well-known and high-profile programs that will be ramping up in the coming years, such as the joint strike fighter, air and missile defense radar, and long-range discriminating radar,” TTM Chief Executive Tom Edman said on a recent conference call with analysts after the deal was announced on Dec. 4. “To bring in more than 200 engineers with this experience tremendously enhances our growth prospects.”
Anaren employs about 1,000. Costa Mesa-based TTM, the country’s largest printed circuit board maker, has more than 28,000 workers in 25 facilities in North America and China. It operates two production plants in Orange County encompassing 180,000 square feet that specialize in quick turnarounds for a broad range of customers across the western U.S., including in the defense and commercial sectors.
Its 82,000-square-foot plant at 2630 S. Harbor Blvd. in Santa Ana is home to more than 400 workers.
More than 240 people work at its 96,000-square-foot plant in Anaheim, which it acquired in 2015 through its blockbuster $950 million buy of Viasystems Group Inc.
Roughly 70% of Anaren’s annual $219 million in revenue is generated from aerospace and defense work, while 30% comes from communications-related sectors primarily in wireless infrastructure, markets primed for increased spending due to next-gen military systems and the ongoing ramp-up of 5G connectivity (see chart, this page).
Anaren’s annual revenue pales in comparison to TTM, which posted sales of $2.5 billion last year. In the 12 months through September, the combined companies earned $450 million before interest, taxes, depreciation and amortization.
Room to Run
Despite TTM’s designation as the world’s largest PCB supplier to the U.S. military, less than 15% of annual sales are generated from the aerospace and defense sector, according to a recent investor note by Stifel Nicolaus analyst Matthew Sheerin.
The combined entity would have little customer overlap beyond defense and tech giants Honeywell, Raytheon, Northrup Grumman, Lockheed Martin, BAE, Samsung, Huawei and Nokia, according to an investor presentation on the deal.
TTM’s five biggest customers last year—Apple, Autoliv, Cisco Systems, Huawei and Robert Bosch—accounted for a third of sales, according to its annual report. Apple, its largest customer, accounted for 15%, or roughly $380 million. Other major Anaren customers include Boeing, GE Aviation and Thales, which operates its avionics unit from Irvine.
Sheeren has a positive view of the deal.
“The acquisition will expand TTM’s product portfolio beyond PCBs into complementary RF components and subsystems, and significantly expand its design/engineering capabilities,” he wrote in the investor note. “This should translate into cross-sell opportunities across several end markets.”
Stifel maintained its buy rating on TTM’s stock and increased its price target from $18 to $20. TTM shares, which are up 11.7% this year, were trading at $15.40 as of late last week, with a market value of about $1.5 billion.
The third-largest transaction in TTM’s nearly 20-year history would be financed through cash and an existing Term B loan. The deal, scheduled to close in the first half of next year, would catapult it ahead of Tokyo-based Nippon Mektron Ltd. for the title of the world’s largest printed circuit board maker.
TTM said the acquisition would result in about $15 million in cost synergies within the first two years of the transaction’s closing.
