MTS Systems Corporation, a leading global supplier of high-performance test systems and position sensors, announced today that it has entered into a definitive purchase agreement where MTS Systems Corporation (“MTS”) will acquire 100% of PCB Group Inc. (“PCB”) for $580 million through a merger of a newly formed subsidiary of MTS into PCB, with PCB surviving as a wholly-owned subsidiary of MTS after the closing. Through a strong focus on “total customer satisfaction” over its five-decade history, PCB has become a global leader in the design, manufacture and distribution of sensor technologies that both enhance the performance of its customers’ products, and enable those products to enter the market more rapidly and reliably. This mission and focus is virtually identical to that of MTS, uniquely spanning both of MTS’s Sensor and Test business units. MTS’s Board of Directors and PCB shareholders have approved the transaction. The transaction is not subject to approval by MTS’s shareholders.
The combination of MTS and PCB brings together two companies with strikingly similar cultures and demonstrated track records of innovation spanning 50 years, creating a technology-leading “Test and Measurement” solutions provider that will serve a global customer base ranging from leading OEMs in automotive, aerospace, infrastructure and industrial products, to universities and research laboratories. The transaction creates a company with an exceptionally complementary array of products and solutions that accelerates MTS’s growth strategy in Test Products, Test Services and Sensors, and brings new capabilities to serve the diversified test and measurement markets world-wide. The combination of MTS and PCB will immediately produce a market-leading “Test and Measurement” company, with more than 3,400 global employees generating pro-forma FY16 annualized revenues of roughly $785 million, and we believe has the capability of delivering sustained long-term double digit growth rates on both the top and bottom line. This growth is fueled by increasing investments in new products and research laboratories by OEMs and research institutes around the world.
Once the transaction is complete, the MTS Sensors business unit will be combined with the PCB business, while retaining each company’s well-established brand names for their historical product lines. The combined Sensors business unit will be headquartered in Depew, New York, and will be led by David T. Hore, current President of PCB. Mr. Hore will report directly to Dr. Jeffrey Graves, President and Chief Executive Officer of MTS. The new structure of MTS will include two significant business units, Test and Sensors, each having critical mass, with strong synergies linking the two businesses under one corporate structure, benefiting the combined customer base and creating enhanced and sustainable value for MTS shareholders.
“PCB, under the seasoned leadership of Dave Hore and his Executive Team, is an excellent strategic fit with MTS,” said Dr. Graves. “The combination significantly strengthens and broadens our Sensor product offerings, and is highly synergistic with both our Test and Sensor business units, making it a unique fit with MTS. This provides us with significant cross selling opportunities for PCB and MTS products, enhancing both product and service offerings, benefiting customers and providing MTS with substantial synergies. In addition, the highly innovative, technology-leading culture of PCB is an ideal fit with MTS’s culture. The combination will create a robust business focused on operational excellence, with natural synergies between the two businesses, low capex requirements and the ability to generate strong cash flow.”
“PCB is truly excited about joining MTS,” said Mr. Hore. “Our technology leadership, innovative spirit, and commitment to ‘total customer satisfaction’ are just a few of the many attributes that make us a great fit with MTS. We believe MTS is the right partner to expand our leading sensor position to drive future growth. We are confident that this combination will create value for our collective customers and employees and for MTS’s shareholders for years to come.”
MTS expects to realize approximately $20 to $30 million of annualized revenue synergies and expects to generate $5 to $7 million of annualized cost synergies over the next three to four years. The revenue synergies are expected to be generated from additional sales of MTS products to the PCB customer base, as well as additional sales of PCB products to the MTS customer base across both the Sensor and Test markets. The cost synergies are expected to primarily result from supply chain and operational efficiencies derived from the integration. We expect the three year run-rate synergies to result in a valuation multiple of roughly 9.8 times EBITDA for calendar year 2015. MTS expects to incur approximately $31 to $36 million of non-recurring transaction-related expenses over the next 24 months, with an estimated $27 to $29 million occurring in fiscal 2016, and the remainder to be incurred over the following 18 to 24 months. Excluding these non-recurring charges, the transaction is expected to be accretive to earnings by fiscal 2018 and, on a cash basis, which excludes transaction related intangible and financing expense amortization and non-recurring items, it is expected to be accretive in fiscal 2017.
Source : mts.com