Automotive parts maker Tesma International said on Thursday it will buy a US automotive supplier, expanding its product base in a cash and debt deal that also will boost yearly earnings, Reuters reported.
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The Canadian automotive engine and transmission parts maker reportedly said its acquisition of privately-held Davis Industries may lift earnings per share by more than 10 cents annually.
According to Reuters, Tesma, a unit of Magna International Inc., did not disclose financial details, but said Davis had notched sales of about $US129 million in fiscal 2003.
The news agency noted a deal had been expected since November when Tesma, after acquisitions prowl, indicated it had one in mind.
“At the time, they said it would be a $50 million acquisition and it would boost revenues by $100 million so this looks like it may be it, it’s hard to say,” National Bank Financial analyst MacMurray Whale told Reuters.
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By GlobalDataThe news agency said Concord, Ontario-based Tesma includes General Motors and Ford among its customers and said the Davis deal, especially its main stamped powertrain components and assemblies products, will broaden its access to other carmakers.
“It fits in quite nicely with the rest of the stamped powertrain components that they do, so it’s building on a pretty healthy existing base of business,” an analyst who asked not be identified told Reuters.
The news agency said the key benefit of the deal is that it gives Tesma an added foothold in supplying foreign vehicle makers in the United States since Davis gains some 30% of sales in that category.
“It increases exposure to the new domestics in the U.S … so it’s the right move for Tesma,” Whale told Reuters, adding: “It’s been tough for all the auto suppliers to penetrate any of the new domestics because they typically manufacture parts as well as their assembly.”
Plymouth, Michigan-based Davis has three manufacturing facilities in Indiana and Tennessee and an engineering centre in Michigan, Reuters said.
Anthony Dobranowski, Tesma’s president and CFO, told the news agency the purchase triples its US manufacturing base.
