Taiwan’s Yageo Corp. said it would buy Pulse Electronics for $740 million, marking its biggest deal ever as it looks to expand in the United States and Europe.
The cash offer is the second midsize bid from a Taiwanese electronics company to buy a U.S. company in recent months. The other one was Foxconn’s $866 million offer for PC accessories company Belkin in March.
Acquiring Pulse, a maker of electronic components for cars and heavy industries, will strengthen Yageo’s position in the automotive electronics market, a Yageo executive said at a news conference Tuesday, underscoring the growing focus on new-energy vehicles that use more smart technology.
Pulse, which also sells into the wireless and wireline communications market and defense industry, won several key customers last year, including a new contract to supply to a leading U.S. electric vehicle company, it said in January.
Last year, Pulse, of Vancouver, Wash., reported revenue of $315 million and a net profit of $34.6 million.
Yageo provides resistors, capacitors, wireless components and soft ferrite products for consumer, automotive and industrial markets, according to the company’s website.
The company’s shares have had a big run recently after years of middling performance — climbing sevenfold in the past year.
Its revenue rose 62 percent in the March quarter to a record 11 billion Taiwan dollars ($368.25 million) while the company posted its highest ever net profit as well.
The latest news:
The acquisition would expand the company’s product mix to include wireless components, high-end power transformers and power suppliers, chip inductors and network connectors and antennas to create a one-stop shop for clients, Andy Sung (宋志揚), a manager at Yageo’s corporate development department, told a media briefing.
Yageo has about NT$25 billion in cash and the acquisition does not require financing, Sung said.
The addition of Pulse Electronics would improve Yageo’s coverage of niche markets, such as automotive electronics, while the US company’s footprint and distribution channels would help raise Yageo’s visibility globally, he said.
Pulse Electronics has also built up significant brand power in its 70-year history, as well as patents related to 5G wireless networking and electric vehicles, he added.
Pending regulatory approval by authorities in Taiwan and major markets, Yageo could begin to recognize Pulse Electronics’ revenue and profit in the final quarter of this year at the earliest, market observers have said.
The acquisition is expected to boost Yageo’s revenue about 37.3 percent and raise its earnings per share by NT$3.7 based on its current capitalization, they said.
Pulse Electronics last year posted sales of NT$12 billion, of which 44 percent were in China, followed by 32 percent in Europe and 15 percent in North America, Sung said.
Networking equipment accounted for 33 percent of the US company’s sales last year, while wireless communications accounted for 22 percent, power made up 21 percent, industrial components constituted 18 percent and automotive contributed 6 percent, he said.
While Yageo has developed networking and wireless components for the past two decades, the sector accounts for only 2 percent of total sales, he added.
Pulse Electronics in 2015 became a portfolio company under Oaktree Capital Management Inc, which invested US$17 million and subsequently acquired 100 percent of the company, according to Pulse Electronics’ Web site.
Yageo’s announcement came amid rampant speculation that the company would acquire a stake in CMC Magnetic Co Ltd (中環).
CMC shares have rallied 4.69 percent due to the speculation.