Littelfuse Announces Song Long Acquisiton and Ireland Plant Shutdown
Littelfuse, Inc. announced that it has signed a definitive agreement to acquire the assets of Song Long Electronics Co., Ltd., headquartered in Taiwan, for $5.5 million in cash. Song Long manufactures metal oxide varistors at its facility in Dongguan, China. The company has annual sales of approximately $5.5 million, including $2 million of sales to Littelfuse.
"This is an important strategic move for Littelfuse," said Gordon Hunter, Chief Executive Officer. "Littelfuse's broad, high-quality varistor product offering is currently hampered by a cost position in Ireland that is not competitive with today's global market. The Song Long acquisition provides a high-quality, low-cost China manufacturing platform to which we will transfer this product line over the next two years."
"Song Long has been a supplier partner to Littelfuse for the past five years. Over that period, we have developed a strong working relationship with Song Long's talented management team and have been impressed with their skilled workforce. Their dedication to quality and customer service will be valuable assets for Littelfuse," added Hunter.
The downsizing and ultimate closure of the Ireland facility will result in pre-tax restructuring charges of approximately Euros 14.3 million or about $18 million at today's exchange rate. The cash outflows for this restructuring will occur largely in 2007 and 2008, but in accordance with accounting guidelines, the entire charge of approximately $0.53 per share will be booked in the second quarter of 2006. Cost savings related to the move of the varistor line are expected to begin in 2007 and reach an annual run rate of at least $10 million by the end of 2008.
"This acquisition is another step forward in our strategy to expand our operations in Asia in order to be closer to current and potential customers, ensure a competitive cost position and participate in the growth of the entire region," said Hunter.
"The decision to move production from Ireland was difficult, especially because of the many employees at this facility who have contributed to our successful growth. However, we believe this step is in the best interest of our company, our customers and our shareholders over the long term," added Hunter.