recently announced that it has entered into a definitive
agreement to acquire Switzerland-based RIWISA. This
privately-held company provides injection molding and automation
solutions. Although the financial terms were not disclosed, the
transaction is expected to be complete by the end of October this
RIWISA's acquisition will boost Flextronics' product offerings in
the medical sector. Under the terms of the agreement, Flextronics
will acquire RIWISA's manufacturing facilities as well as its
existing employee pool. We believe that the acquisition of a
highly trained and skilled, ready-to-deploy employee group will
save a lot of time and training resources.
Moreover, the takeover will expand Flextronics' footprint in
Europe, which is on the verge of an economic recovery following a
prolonged period of economic stagnation. We believe that the
RIWISA facility acquisition will further drive Flextronics'
growth prospects over the long term.
The recent acquisition follows the takeover of certain assets of
Motorola Mobility LLC, a division of
. Flextronics acquired Motorola's manufacturing facility,
equipment and employees in Tianjin, China and Jaguariuna, Brazil
for an undisclosed amount.
Flextronics expects the Motorola deal to be accretive on both
operating income and earnings per share basis for fiscal 2014.
Its revenue potential is expected to be of several billions. The
company expects to earn a return on invested capital ("ROIC") of
20% going forward.
Flextronics has undertaken a number of new initiatives to gain a
competitive edge, which include divestiture of non-core assets
and deployment of new technologies. New programs are expected to
boost production volumes in fiscal 2014, although profitability
is expected to remain weak due to continuing investments.
In this regard, we believe that strategic acquisitions and strong
new bookings will also drive top-line growth over the long term.
However, macroeconomic concerns and weak end-market demand are
major headwinds in the near term.
Moreover, the portfolio realignment is also expected to hurt
Flextronics' top-line growth in the near term. Further,
increasing competition from
Jabil Circuit Inc. (
Plexus Corp (
remains a concern going forward.
Currently, Flextronics has a Zacks Rank #3 (Hold).
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