The European investment group Wendel is the main shareholder of harsh connector supplier Deutsch, currently in line for acquistion by TE Connectivity (NYSE: TEL). Commenting on the proposed $2B deal, Frédéric Lemoine, chairman of Wendel's executive board stated, "The offer received from TE Connectivity provides a particularly promising outlook for Deutsch and its employees. After years of successful cooperation with Wendel, the company would be able to leverage the strengths of a very large, global industrial group to reinforce its R&D and its industrial operations. This transaction will deliver a substantial capital gain and will enable Wendel to have significant resources for its investment strategy and to pursue early repayments of its financial debt. These are two key success factors in the current economic environment."
Further, a press release issued by Wendel stated the following:
"The transaction would foster the growth of both companies, due to complementary product portfolios that will allow them to better serve industrial customers across a range of end markets, including aerospace and defense, industry, rail, and offshore oil and gas. It will strengthen TE Connectivity's position as a leader in the global connectivity marketplace. Innovation is a major strength of Deutsch. Eighty-percent of its products are custom-made, designed in close cooperation with its customers' design offices. TE Connectivity also places a special emphasis on innovation and thus intends for Deutsch's teams to become part of its highly active research and development operations. For example, Deutsch's Le Mans plant is expected to become a Center of Excellence for TE Connectivity's Offshore Oil and Gas connectivity R & D and the Evreux plant is expected to become a Center of Excellence for the combined companies' Aerospace and Defense connectors product range. Considering the great value attached to the Deutsch brand, TE Connectivity intends maintain it and shall endeavor to grow and protect the brand."
The press release went on to note that, since its acquisition in June 2006 by Wendel, from the Deutsch founding family in the United States, Deutsch has increased its sales by more than 22%, and has improved its EBITDA margin by more than 500 bps to over 25% (expected for 2011), despite the 2008-2009 global economic crisis.
At the time of its acquisition by Wendel, Deutsch was composed of five companies with independent operations that Wendel has transformed into a worldwide group with three divisions: Industrial Transportation, Aerospace & Defense, and Offshore. Wendel stated that it has invested in Deutsch's development both organically and through external growth. The group said that it has promoted innovation and new product development, and supported targeted acquisitions such as Ladd and Servo, distributors in the United States and United Kingdom, respectively. Since 2006, Wendel said that it has also strengthened Deutsch's global management and operational optimization programs.
Finally, he investment group notes that Deutsch promptly recovered after the economic crisis in 2008-2009, when Wendel reinvested more than $90 million to successfully complete Deutsch's debt restructuring, and at the same time purchased the remaining non-controlling interest in Ladd (40%), which was still held by minority shareholders.
Source: Wendel grants exclusivity to TE Connectivity for the sale of Deutsch (4-traders.com)
