Thomas Edman’s first deal at the helm of Costa Mesa-based TTM Technologies Inc. could create the world’s largest printed circuit board maker.
The pending $927 million buy—which includes cash, stock and a debt swap for St. Louis-based Viasystems Group Inc.—would form a company with some 30,000 employees and 28 manufacturing plants in the U.S. and China.
The new TTM would still face a slew of competitors in the highly fragmented industry, with less than 5% of global market share in an industry that’s centered in Asia and has more than 2,000 players.
The combined sales of TTM and Viasystems would be around $2.5 billion, just behind No. 1 Tokyo-based Nippon Mektron Ltd., according to public filings and data from market researcher Prismark Partners LLC in New York. The acquisition by TTM is expected to close in the first half of next year. It would come more than two years after Viasystems bought Anaheim-based circuit board maker DDi Corp. for $268 million, ending its 12-year stint as a Nasdaq-listed stock.
Factory Capacity
The deal also would follow a move by TTM in early 2013 to reduce factory capacity through a swap of facilities with a former joint-venture partner in China. That shift came on the heels of a rugged 2012, when TTM posted a $175 million loss. The factory swap in China helped it rebound to $21.9 million in earnings last year.
TTM’s line of circuit boards go into many products, including routers and switches, smartphones, and medical imaging and diagnostic equipment.
TTM and Viasystems have battled for years to claim the top revenue spot among U.S. circuit board makers while primarily serving different customers. Now TTM will rely on Viasystems’ strong presence in the automotive business—a segment it has not historically served—to lessen its reliance on the volatile mobile phone market, where circuit boards have largely become a commodity.
Edman took the opportunity on a conference call last week to call the marriage a “transformational milestone” for TTM, whose largest customers last year were Apple Inc., Ericsson, Cisco Systems Inc., Huawei Technologies Co., and Juniper Networks Inc.
“It represents a dramatic expansion of TTM’s diversification strategy,” said Edman, who replaced longtime Chief Executive Kenton Alder after his retirement at the end of last year.
Alder, who held the top post since the company’s launch in 1998, serves on the board and will hold an advisory position until the end of this year.
Apple
Cupertino-based Apple was TTM’s largest customer, accounting for about 20%, or $273.6 million, of its annual sales.
The consumer electronics giant, which has grabbed global headlines the past few weeks with the launch of the iPhone 6 and 6 Plus, accounted for TTM’s entire market share for its cellphone business line, according to its annual report.
Viasystems’ five largest customers are Alcatel-Lucent, an IP, networking and wireless service provider; Autoliv Inc., a car safety systems maker; Bosch Ltd., an automotive products maker in India; car parts and related software maker Continental AG; and General Motors Co.
“This is a highly stable business segment,” Edman said of the automotive accounts.
Viasystems’ chief executive, Dave Sindelar, said the anticipated benefits of a sale to TTM are clear: “Reach more customers and end-markets.”
TTM expects to cut about $25 million in costs from the combined company within 12 months of closing the deal.
The acquisition is projected to add about $3 million in annual profits in a sector with razor-thin margins.
No Hurdles Expected
The transaction is not expected to face regulatory hurdles in the U.S. or antitrust concerns from China’s Ministry of Commerce, which has held up the integration plan in Irvine-based Western Digital Corp.’s $4.8 billion buy of Hitachi Global Storage Technologies Inc. in San Jose.
That deal was finalized in 2012 after Western Digital made some concessions, but particularly drew the ire of Chinese regulators, who argued at the time that the marriage of two of the largest disk drive companies in the world could shift the competitive landscape to the detriment of consumers in China, one of the world’s largest PC markets.
TTM and Viasystems executives don’t foresee the same fate.
“It’s not significant and we rarely compete directly with one another,” Edman said. “This really is a global industry.”
