(Alliance News) - Cable assembly maker Volex PLC said Tuesday it acquired US assemblies maker Servatron Inc for up to USD28.5 million in cash and shares.
Earlier on Tuesday, the chair of Volex reported first quarter trading has been "strong" with revenue growing and profit margins ahead of expectations.
Volex will pay up to USD28.5 million for printed circuit board assembly maker Servatron, including assumption of USD6.7 million in net debt. The firm forecasts the acquisition to completed by Wednesday.
In 2018, Servatron generated pretax profit of USD2.5 million on revenue of USD35.6 million. Following strong growth, however, over the six months ended June the US firm reported USD2.0 million in pretax profit from USD23.1 million revenue.
For the financial year ended March, Volex generated USD11.6 million pretax profit from revenue of USD372.1 million.
"It is an extremely high-quality and well-managed business, which will now be able to access our unique global footprint," Executive Chair Nat Rothschild said. "Our own world-class cable assemblies division gets a diverse range of interconnect products and integrated solutions to offer our existing accounts. This is a win-win deal."
Earlier on Tuesday, speaking at the annual general meeting of the firm, Rothschild reported revenue had grown 12% on the year prior on a reported basis, and was up 14% at constant currency.
Meanwhile, operating profit margins were "ahead of current expectations" after the firm had focused on improving profitability from its core business as well as the successfully integration of recent acquisitions.
"Our global footprint allows us to mitigate the effect of US tariffs on Chinese manufactured goods as we move production of certain products from China to other locations such as Vietnam and Indonesia," Rothschild said.
"We have secured a number of new major contract wins in our PVC power business as our strategy to invest in automation, vertical integration and standardised products improves our competitiveness in the market."
Volex will propose a 1.0 pence per share interim dividend, after not paying an interim dividend the year prior. This will be announced at its half year results in November.
"Volex is well positioned to make further progress this year and the board remains confident about the group's outlook", Rothschild added.
Shares in Volex were 7.8% higher at 93.05 pence in London on Tuesday.
Volex (VLX)