Benchmark to buy Pemstar in $300M deal.ANGLETON, TX -- Benchmark Electronics (bench.com) will buy Pemstar Inc. (pemstar.com) in a stock swap A stock swap also known as a share swap or equity swap is a business takeover in which the acquiring company uses its own stock to pay for the acquired company. worth about $300 million, including the assumption of debt. The deal is expected to close in the first quarter of 2007. Benchmark is the world's eighth largest EMS provider, with calendar 2005 sales of $2.26 billion. Pemstar is ranked 14th, with fiscal 2006 sales of $871 million. The combined company would have more than 13,000 employees and four million sq. ft. of factory space spanning some 28 plants. Benchmark expects to realize $20 million a year in cost savings, primarily from greater capacity utilization Capacity Utilization measures the rate at which a firm makes use of their capital productive capacities, such as factories and machinery. Capacity Utilization generally rises when the economy is healthy and falls when demand softens. . The deal prices Pemstar at about one-third of its annual revenues. However, Pemstar comes with roughly $125 million in debt (not including accounts payable) and lost a cumulative $5.7 million during the past four quarters. Benchmark said it will pay the debt upon completion of the deal. Some restructuring may be in order to eliminate manufacturing redundancies in Minnesota, Texas, Ireland, Singapore and Thailand, but overall minimal restructuring is expected, Deutsche Bank Deutsche Bank AG (IPA: /'dɔɪ.tʃə/[1]) (ISIN: DE0005140008, NYSE: DB) (English: German Bank (db.com) said. A buyer will still be sought for Pemstar's Tianjin, China site, which builds turnkey products for consumer markets, Benchmark said. The site produces $250 million to $300 million worth of product annually. Unlike many of its competitors, Benchmark's past growth has primarily been organic. Benchmark has been discriminating dis·crim·i·nat·ing adj. 1. a. Able to recognize or draw fine distinctions; perceptive. b. Showing careful judgment or fine taste: in its acquisitions, despite actively analyzing several possibilities, said CFO See Chief Financial Officer. Gayla Delly on a conference call following the announcement. "Pemstar provided a combination of skill and scale," she said. Benchmark gains a foothold in the military and aerospace segments, and adds to its design capabilities. In a research note, Deutsche Bank analyst Carter Shoop said, "We believe Benchmark's acquisition of Pemstar makes good strategic sense. Given Benchmark's higher level of customer satisfaction and stronger balance sheet and Pemstar's recent restructuring (limited excess capacity/needs to restructure), we view this as a favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. acquisition with limited downside risk Downside Risk An estimation of a security's potential to suffer a decline in price if the market conditions turn bad. Notes: You can think of this as an estimate of the amount that you could lose on a stock or other investment. ." Edited by Mike Buetow |
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