Costa Mesa-based circuit board maker TTM Technologies Inc. will cut its production capacity in China under a deal to swap production plants with another manufacturer.
The company last week signed a deal with Shengyi Technology Co. to sell its 70.2% stake in a 190,000-square-foot plant in Donguann, China, for about $113 million.
TTM will acquire Shengyi’s 20% stake in a nearby 650,000-square-foot plant for roughly $29 million.
The two companies had co-owned both plants, which primarily manufacture traditional printed circuit boards.
The transactions will bring about $84 million in cash for TTM, which plans to use about half of the proceeds to pay down debt.
The deal “modestly” reduces the company’s production capacity in China, according to analyst Matt Sheerin.
“That’s fairly important, given weak demand in Asia in their nonmobile business, like computing, telecom and the industrial market,” said Sheerin, managing director of equity research in the New York office of St. Louis-based Stifel Financial Corp.
TTM’s production in China has been running at about 65% of capacity, according to Sheerin.
The deal’s net effect should increase production capacity up to 78%, which will slightly increase margins, he said.
TTM is known to supply Apple Inc. with components for its iPhones and iPads. TTM gets about 14% of its $1.3 billion or so in annual revenue from Apple, and its shares frequently track the Cupertino-based company’s movements on Wall Street.
TTM will operate 14 manufacturing plants split between the U.S. and China once the deal with Shengyi is final. The company recently closed the plant it is selling in China for repairs and upgrades. The company earmarked about $6 million for the renovation project.
$521M Buy
The company acquired the plant in a $521 million buy of Hong Kong-based Meadville Holdings Ltd. in 2010.
That deal also netted TTM six other plants in China, adding 13,000 workers to its ranks. The company had about 400 employees in Orange County at the time, with most of its business centered in the U.S.
The purchase doubled the size of the company, and TTM now is the largest printed circuit board maker in the U.S., with $1.34 billion in revenue in 2012.
It could lose that crown following Viasystems Group Inc.’s $228 million buy of Anaheim-based DDi Corp. last year. The combined company, based in St. Louis, is expected to have annual revenue of $1.3 billion and employ some 15,650 workers.
TTM projects a $3 million to $6 million revenue hit in the first half of the year and a “slight impact” on margins as it shifts production to other facilities in south China.
Analysts on average forecast sales of nearly $660 million for TTM for the first six months of the year.
TTM moved its headquarters to Orange County in 2003 from Redmond, Wash., after it bought Advanced Circuits Inc., a unit of Honeywell International Inc., and took over its local plant.
