Boston manufacturing to acquire IEC Electronics

Boston manufacturing to acquire IEC Electronics

Newark’s IEC Electronics Corp. has agreed to be acquired by a Boston-based electronics manufacturing services supplier in a deal worth nearly $174 million.

The Wayne County manufacturer on Thursday said the two companies had signed a definitive merger agreement under which Creation Technologies will acquire all outstanding shares of IEC for $15.35 per share in cash, with an aggregate value of $242.3 million, based on debt of $68.6 million. The transaction has been unanimously approved by the boards of directors of both companies.

IEC is a leading provider of high-complexity, low-to-medium volume electronic manufacturing services focused on high-reliability applications within the aerospace and defense, medical and industrial end markets. The merger will boost IEC’s existing production capabilities with access to Creation’s existing low-cost manufacturing facilities in Mexico.

Creation Technologies is a global EMS supplier with a focus on medium volume, high-reliability customers in aerospace and defense, medical and tech industrial markets. Creation and IEC combined will have more than 4,000 employees in facilities located in the U.S., Canada, Mexico and China.

“IEC is excited about joining the Creation family. The transaction presents our stakeholders with immediate value while providing our customers a broader platform for continued growth,” said IEC President and CEO Jeffrey Schlarbaum in a statement.

The purchase price represents a premium of roughly 47 percent to IEC’s closing share price on Aug. 11. Following the closing of the tender offer, a wholly owned subsidiary of Creation will merge with and into IEC, with each share of IEC common stock that has not been tendered being converted into the right to receive the same $15.35 per share in cash offered in the tender offer. The transaction will be financed through a committed debt financing package provided by JPMorgan Chase Bank and Citizens Bank. The transaction is expected to close by early October 2021.

“A combination of IEC and Creation creates a leading medium volume, high-reliability electronics manufacturer with a customer service driven culture,” said Stephen DeFalco, Chairman and CEO of Creation. “Furthermore, IEC and Creation’s complementary geographic footprints create a premier full-service North American supply chain for both companies’ customers.”

Upon completion of the transaction, IEC will become a privately held company and shares of IEC’s common stock will no longer be listed on any public market.

Separately on Thursday, IEC reported third-quarter revenues of $49.4 million, an increase of 4.2 percent from $47.4 million for the third quarter last year. Gross profit for the third quarter of was $5.2 million, or 10.6 percent of sales, compared with gross profit of $6.6 million, or 14 percent of sales in the third quarter of fiscal 2020. Operating profit was $1.9 million for the third quarter of fiscal 2021, compared with an operating profit of $3.0 million for the same quarter in the prior fiscal year.

The company reported net income of $1 million or 10 cents per basic share and 9 cents per diluted share for the third quarter, compared with net income of $2.1 million or 20 cents per basic and diluted share in the third quarter of fiscal 2020.

“We were pleased to have delivered solid revenue growth during the third quarter of fiscal 2021 of $49.4 million, despite headwinds that we, and many in our industry, are experiencing related to ongoing material shortages and labor constraints,” Schlarbaum said in a separate statement. “During the fiscal quarter, we continued to ramp multiple exciting new programs. As we noted last fiscal quarter, given the complexity of the programs we service, the ramping process is not linear and frequently includes process development adaptations which continue to impact profitability. However, once established, we anticipate that these programs will provide considerable long-term revenue and margin opportunity for IEC.”

Schlarbaum said he is encouraged by the increased backlog compared with year-end fiscal 2020. The company also extended a contract worth $45 million, he noted.

“We believe this recent contract extension serves as a strong endorsement of our capabilities and reliability and speaks to IEC’s position in the marketplace as we pursue new customers and contracts,” Schlarbaum said. “We believe we remain uniquely positioned to drive long-term growth for our shareholders. We are pleased to have made solid progress throughout this challenging year to advance our leadership position and we are excited about the opportunities we are seeing to win new customers and programs as we move toward delivering an expected strong close to fiscal 2021.”

Shares of company stock (Nasdaq: IEC) closed Wednesday at $10.31.

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