Jabil Circuit Inc. (
recently announced that it has completed the acquisition of
Clinton, Mass.-based privately-held Nypro Inc for $665.0 million.
Nypro manufactures precision plastic products for customers in
the healthcare, packaging and consumer electronics sector. Nypro
has 20 manufacturing units in almost 10 countries, employs a
workforce of approximately 10K and generates annual revenues of
more than $1.2 billion.
Nypro has three principal business units namely healthcare (45.0%
of revenues), rigid plastic packaging (23.0% of revenues) and
consumer electronics (32.0% of revenues). The company has a
strong presence in Americas and Asia.
The acquisition will boost Jabil's position in key markets such
as healthcare (approximately $65.0 billion addressable market).
Moreover, the acquisition will help Jabil to penetrate the fast
growing packaging market (approximately $140.0 billion
Nypro's consumer electronics segment will be integrated into
Jabil's materials technology services. Jabil plans to retain the
Nypro trade name and jointly market its services in the
healthcare and packaging industry.
Over the years, acquisitions have been a key growth driver for
Jabil. We believe that the Nypro acquisition not only diversifies
Jabil's business operations but also lowers customer
Although Jabil is not a frequent acquirer, we believe that the
company, based on its healthy cash balance, will continue to
pursue acquisitions that strategically fit into its operations.
At the end of third quarter of 2013, cash and cash equivalents
were $1.35 billion, up from $1.06 billion in the previous
Jabil expects the acquisition to be accretive to fiscal 2014
earnings. The company expects to earn $2.77 per share in fiscal
2014, driven by strong growth from the Nypro acquisition (16 to
22 cents), restructuring benefits (11 to 15 cents) and organic
growth (11 to 31 cents).
We believe that strong growth from the Nypro acquisition,
restructuring benefits and new customer wins will help Jabil to
Benchmark Electronics (
going forward. Jabil's increasing association with
is also expected to boost its growth prospects in the near term.
However, we believe that Jabil will continue to face
macroeconomic headwinds in the near term. The company continues
to invest in the diversified manufacturing segment, which will
increase its capital expenditure going forward.
Currently, Jabil Circuit has a Zacks Rank #3 (Hold).
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