In a move that combines a global contract manufacturer with a major Asian electronics injection molder, Jabil Circuit Inc. plans to acquire Taiwan Green Point Enterprises Co. Ltd.
Taichung, Taiwan-based Green Point was established in 1979, employs about 30,000, operates significantly more than 500 molding presses and reported 2005 sales of NT$11.3 billion (US$352 million).
Green Point has seven plants in China and one plant each in Taiwan and Malaysia. There is some overlap with existing Jabil facilities, but consolidation is seen as unlikely.
On Nov. 23, Jabil launched a 50-day tender offer in Taiwan to acquire all of Green Point's outstanding shares for NT$109 per share in cash. The offer should be worth about US$875 million to $900 million and may close in the spring.
Discussions began in late 2005, and shareholders owning 42.7 percent of Green Point's outstanding shares have agreed to the deal.
Green Point is a ``market leader in design and manufacturing plastic and metal parts for the consumer and mobile products market'' and has a 12 percent global market share in handset casings, Timothy Main, Jabil president and chief executive officer, said in a Nov. 22 conference call with security analysts. Green Point claims to be the world's fourth-largest maker of cellular telephone casings.
New York-based debt analyst Fitch Ratings said Green Point's largest customers, Motorola and Sony Ericsson, will provide potential new customers for Jabil, complementing its existing business with Nokia. Although Green Point has significant metal operations, Fitch said the company primarily is a plastics injection molder.
Green Point has strengths in advanced decoration and coating technologies and in using what Main called ``alternative materials,'' including magnesium. The range of original equipment manufacturers demanding those capabilities ``narrows the population of major suppliers that the OEMs can go to,'' according to Main. ``Green Point is one of them,'' he said.
Main said Green Point has ``expertise in standard-brand plastics and metals'' that Jabil ``can use in other operations.''
Also, Green Point makes most of the molds that it uses in-house. Main said there is a lot potential to use Green Point's tooling capability within Jabil. ``We are encouraged that Green Point has strong tooling capability,'' he said.
Jabil competes mostly with Celestica Inc., Flextronics International Ltd., Hon-Hai Precision Industry Co. Ltd., Sanmina-SCI Corp. and Solectron Corp. Some of those competitors have vertically integrated in recent years, adding in-house molding, tooling and design to their contract assembly and supply-chain management capabilities.
Although the Green Point deal broadens Jabil's manufacturing range, Main said Jabil will continue to use outside suppliers.
``We can provide a better solution'' working with a range of suppliers, Main said. ``We have to pop up in different parts of the world.''
Jabil will retain the Green Point name and operate Green Point as an independent business with joint marketing of certain integrated services.
Citigroup is advising Jabil in this transaction.
St. Petersburg, Fla.-based Jabil has delayed filing its annual report for the fiscal year ended Aug. 31, while evaluating its historical stock-option grant practices. On this matter, Jabil is responding to investigations of the Securities and Exchange Commission and the U.S. District Attorney in New York and dealing with several related shareholder derivative and purported securities class-action lawsuits.
On Sept. 26, Jabil supplied unaudited data indicating fiscal-year sales of $10.3 billion. For the previous fiscal year, ended Aug. 31, 2005, Jabil reported profit of $231.8 million on sales of $7.52 billion. At that time, Jabil employed 40,000.