The acquisition, which was jointly announced by the two companies Wednesday (July 26), marks the largest all-cash transaction in the technology space in Singapore since 2000 when the tech bubble collapsed.
While in the same industry, the design capabilities of the two companies are largely complementary, and according to Venture, their combined skill sets will allow the merged entity to offer a range of design services that extends beyond their existing offerings. The company added that the acquisition will also strengthen VentureÆs position in the higher-margin original design manufacturing (ODM) business.
ABN AMRO is the adviser to Venture, while Credit Suisse is advising GES.
According to the joint announcement, Venture is offering to buy all the issued shares of GES at S$1.25 per share, which equals a 19% premium over the July 25 closing price of S$1.05. It is also at a premium to the record high of S$1.15 reached earlier this month.
Both GES and Venture were suspended from Singapore trading Wednesday (July 26).
The maximum deal value of S$980 million assumes all of GESÆ outstanding options are exercised. If no options were to be exercised at all, the purchase price will drop to S$930.8 million ($587 million). As a result of the transaction, GES will be delisted through a court approved scheme of arrangement.
ôThis is a significant milestone for Venture and provides an exciting opportunity for us to grow our niche and high-mix business further,ö according to a written statement from VentureÆs Chairman and CEO Wong Ngit Liong.
In its presentation to analysts Venture cited synergy cost savings and noted that the acquisition will be earnings accretive for Venture shareholders. It will also leave the enlarged entity with a stronger management team.
Numerically, the company suggested a 10.8% positive proforma financial impact on its figures for the year ended December 31, 2005. In other words, the 2005 net profit of S$201.2 million would have been S$222.8 million had the transaction already happened by then.
With little overlap in their respective capabilities and markets served, the combined businesses will have good opportunities to cross-sell their products and services to an enlarged customer base.
GES provides advanced electronics manufacturing services to original equipment manufacturers, but also serves other markets covering both the industrial and commercial sectors and makes medical instrumentation products. The company, which was founded in 1975 as a manufacturer of PCs that it marketed in Asia under the Datamini Brand, has operations in China, Singapore, Malaysia and the United States.
For the fiscal year ended June 2005, it registered a turnover of S$624 million on which it earned a net profit of S$45 million.
Venture, which ranks among the top electronics services providers in the world, achieved sales of S$3.2 billion in 2005 on which it earned a profit of S$201.2 million. Since 1989, the company has seen a compound annual growth rate of 33% in sales.
The group comprises about 30 companies in South-East Asia, North-East Asia, the Americas and Europe and employs more than 13,000 people worldwide.
The transaction, which needs approval from shareholders of both GES and Venture, is expected to be completed by the fourth quarter of 2006.