) has entered into an agreement to sell its Multitest and Everett
Charles Technologies (ECT) businesses to
) for $93.5 million. LTX-Credence is a Norwood, Mass.-based
semiconductor test equipment maker.
Impact on Shares
The news was not a surprise for investors and thus it hardly made
an impact on Dover's shares. The market had already factored the
sale in the share price. Dover had announced its plan to divest
Everett Charles Technologies (including the Multitest business)
at the time of releasing its fourth quarter 2012 results. The
business was classified as discontinued operations since then.
However, shares of LTX-Credence surged as much as 38% on Sep 6 to
close at $5.79. The surge came on the back of expected benefits
from the acquisition. The acquisition will position LTX- Credence
as the only provider of comprehensive test solutions and services
for the semiconductor and printed circuit board markets. It was
among the top 10 percentage gainers on Nasdaq at the close of
trading on Sep 6.
Rationale Behind the Sale: Focus on Core Growth
In line with Dover's long-term focus on strengthening its
portfolio and intention to focus on its five key growth spaces --
communication components, energy, fluids, refrigeration and food
equipment, and product identification -- Dover had been searching
for buyers for its two non-core businesses serving the electronic
assembly and test markets.
These include Everett Charles Technologies, including the
Multitest business, (ECT) and DEK International (DEK). Although
these businesses have been solid performers, they addressed
highly volatile end-markets and thus the sale should improve the
consistency of Dover's future results.
In a similar move, Dover had announced in May the spin-off of
certain part of its communication technologies businesses into a
standalone, publicly-traded company (Knowles) in order to
concentrate on its core industrial business.
Of the total purchase price of $93.5 million, LTX-Credence will
pay $73.5 million in cash and the balance $20.0 million will be
paid by the issuance of promissory notes. The deal is expected to
close by the end of this year, pursuant to satisfaction of
customary closing conditions.
About Multitest and Everett Charles Technologies
Everett Charles Technologies commands a leadership role since
1965 in the development of advanced technology board test
products and holds over 100 patents. It came under the umbrella
of Dover in November 1996. Founded in 1980, Multitest is the
world's leading producer of equipment and interfaces for the
final testing of electronic components. In 2001, it became
part of Everett Charles.
The businesses were part of Dover's Printing & Identification
segment. The Printing & Identification segment is a worldwide
supplier of precision marking and coding, printing, dispensing,
soldering and coating equipment and related consumables and
The segment currently serves two global end-markets: Fast
Moving Consumer Goods (FMCG) and Industrial. The segment
generated $1 billion in sales in 2012, 12% of Dover's total
revenue and $0.5 billion in the first half of fiscal 2013, or 11%
of total revenue.
Win-Win Situation for LTX-Credence
From LTX-Credence's viewpoint, the acquisition is a win-win
situation considering its manifold benefits. The combined entity
will have trailing 12-month pro-forma revenues of approximately
The acquisition will also increase its access to the
electronics manufacturing industry. To be more precise, the
company's total addressable market will double to $5 billion from
the current $2.5 billion. LTX-Credence will also be able to
diversify into vertical markets, such as PCB (Printed Circuit
Board) and PCBA (Printed Circuit Board Assembly) testing.
Following the acquisition, LTX-Credence is expected to enjoy
annual recurring revenues of approximately $240.0 million (more
than $152 million of revenues earned in fiscal 2013 ended Jul
2013) and approximately $15.0 million in synergies. The
acquisition will be immediately accretive to its earnings.
The $93.5-million deal is comparatively a smaller deal for Dover,
which boasts a market capitalization of $15 billion. It is more
of a game changer for LTX-Credence, which has a market
capitalization of $275 million. It will reduce Dover's exposure
to cyclical markets.
Dover will continue to benefit from its acquisitions and focus
on its key growth areas. However, the Printing &
Identification segment is likely to be affected given its
above-average exposure to Europe, while a lower North American
rig count will constrain growth in the Energy segment.
DOVER CORP (DOV): Free Stock Analysis Report
GORMAN RUPP CO (GRC): Free Stock Analysis
LTX-CREDENCE CP (LTXC): Free Stock Analysis
NOVA MEASURING (NVMI): Free Stock Analysis
To read this article on Zacks.com click here.
Dover currently retains a Zacks Rank #3 (Hold), while
LTX-Credence carries a Zacks Rank #4 (Sell). Other stocks in the
same industry as Dover with a favorable Zacks rank include
), with Zacks Rank # 1 (Strong Buy), while LTX-Credence's peer
Nova Measuring Instruments Ltd.
) retains a Zacks Rank #2 (Buy).