Technitrol to Acquire Germany’s ERA Group
Technitrol Inc. (Trevose, PA) has agreed to acquire ERA Group, a privately held producer of electronic coils and transformers primarily for the European automotive market. In operation since 1969, ERA is based in Herrenberg, Germany, with production operations located in Germany, Tunisia and China. Its principal product line consists of advanced-technology automotive ignition coils and includes a variety of other coils and transformers used in automotive, heating/ventilating/air conditioning and appliance products.
The purchase price is €49 million, or approximately $57 million (as of Friday, November 25, 2005). The acquisition will be financed using bank credit under Technitrol's multi-currency credit facility. Closing of the transaction is expected in early 2006.
ERA will be the cornerstone of the newly formed automotive products division within the power products group of Technitrol's Pulse unit. "ERA and Pulse have much in common," said Technitrol Chairman and Chief Executive Officer James M. Papada, III. "Both are focused on custom-designed products, close relationships with customers, and premier service and technical support. We look forward to welcoming ERA's very strong team of managers and professionals to Pulse and Technitrol."
For the 12 months ending December 31, 2006, ERA's revenues are expected to be about $90 million and, before synergies that will arise from its integration into Pulse, ERA is expected to contribute between $0.08 and $0.10 per diluted share to Technitrol's annual earnings. Pulse expects that the integration of ERA operations will be largely completed by the end of 2007, resulting in annual net savings in cost of goods sold and operating expenses ramping to more than $8 million in 2008.
"ERA is a market leader in automotive coils, transformers and similar components, with very strong relationships with the premier German automakers," said Papada. "As vehicles incorporate increasing numbers of electronic features such as keyless entry systems, intelligent headlights and windshield wipers, drive-by-wire throttle, steering and stabilization systems, analysts believe that for the foreseeable future, the automotive component market will grow in excess of 10% per year, much faster than auto production. We are enthusiastic about the European automotive market, which is known for feature-rich vehicles that require increasing numbers of coils, sensors, immobilizers and power-conversion components supplied by ERA. The European market is also characterized by more balanced relationships between OEMs and suppliers than is typical in North America, which accounts for only 1% of ERA's revenues. ERA's extensive sales and engineering presence will give Pulse's other divisions a strong foothold in Germany, Europe's largest market, where they currently have only a small presence. In addition, Pulse's worldwide manufacturing, marketing and sales infrastructure will help expand ERA's product line and geographic penetration, particularly in the fast-growing markets of East Asia.
"ERA is the technological leader in the area of ignition coils," Papada continued. Widely accepted in Europe, ignition coils are situated near spark plugs, eliminating the need for a distributor in a vehicle's ignition system. "ERA's advanced system engineering team located at the University of Dortmund has developed ionization-sensing ignition coils that are incorporated with the spark plugs. This technology tailors the duration of the spark within a combustion chamber to specific driving conditions, preventing misfires, boosting gas mileage and minimizing unburned hydrocarbon emissions to the environment. It has the potential to make even diesel engines burn cleaner and more efficiently. ERA's technology development leadership and strong customer recognition extend to automotive coils used in a wide variety of applications such as antilock brakes, keyless entry systems, shock absorber sensors and transmission controls," he concluded.