Tokyo-based Nidec, an electric motor company, has agreed to acquire motor maker Kinetek Group of Deerfield, Ill., and Avtron Industrial Automation, an Independence, Oh.-based industrial automation system provider. Kinetek’s shareholders include the private equity fund Resolute Fund. Avrton is owned by Morgenthaler, a private equity firm in Cleveland. Terms of the acquisitions were not disclosed.
Nidec Corporation NJ -0.91% (the “Company” or “Nidec”) today announced that it has agreed to acquire all of the shares in Kinetek Group Inc. (“Kinetek”), a U.S.-based commercial motor manufacturer, from its shareholders, including the Resolute Fund, L.P. , a private equity fund, and to acquire all of the shares in Avtron Industrial Automation Inc. (“Avtron”), a U.S.-based industrial automation system provider, from its shareholder, Morgenthaler, a private equity fund. For these purposes, the Company entered into a definitive agreement with each of the shareholders on September 19, 2012.
1. Nidec’s commercial/industrial motor business is entering a new stage
The Company has endeavored to strengthen and expand its commercial/industrial motor business as one of its strategically important business areas, where Nidec Motor Corporation (formerly, Emerson Electric Co.’s motors and controls business, “NMC”), which the Company acquired in September 2010, has been the primary operating subsidiary. The contemplated acquisitions of Kinetek and Avtron are part of the Company’s strategy to strengthen its commercial/industrial motor business, following the acquisition of Ansaldo Sistemi Industriali S.p.A. (“ASI”) in May 2012.
Assuming that the acquisitions of Kinetek and Avtron are completed as currently contemplated, as a result of the acquisitions of ASI, Kinetek and Avtron, the Company has set target net sales of JPY230 billion for the fiscal year ending March 31, 2014 for its general motors for appliance, commercial and industrial use (“ACIM”) business, formerly the general motors for home appliance and industrial use business, net sales from which for the fiscal year ended March 31, 2012 were JPY124billion. The Company views the global commercial/industrial motor market as an attractive market not only in terms of its size but also in terms of its potential for providing access to high-quality customers and achieving stable growth for products with high margins. The Company intends to take advantage of its state-of-the-art technology and superior manufacturing capabilities and, through the integration of the operations of ASI, Kinetek and Avtron into its global network, further strengthen its unique solutions business.
The Company believes that each of Kinetek and Avtron has a solid financial base with high-margin operations. When making the decisions to acquire Kinetek and Avtron, the Company considered synergy effects that it expected between the Company’s existing business operations and the operations of Kinetek and Avtron to be a particularly important factor. Through the contemplated acquisitions of Kinetek and Avtron, the Company will seek to improve the profitability of the ACIM business and enhance the corporate value of each of the acquired companies.
Following the series of acquisitions completed and currently contemplated pursuant to its strategy to strengthen its commercial/industrial motor business as discussed above, the Company expects that it will be in a better position to achieve its aspiration of “profit margins of 15% or more in all business areas” with respect to the ACIM business in 2015. Once the contemplated acquisitions of Kinetek and Avtron are completed as currently planned, the initial (“building the foundation for growth”) step of the Company’s strategy to strengthen its commercial/industrial motor business will be completed, and the Company plans to shift its strategic focus to achieving synergy among the Company and the acquired operations and improving profitability.
2. Objective of acquiring Kinetek — Aiming to become a leading player in the commercial motor market
Kinetek conducts its commercial motor business on a global basis. Kinetek occupies a leading position in various markets for commercial motors used in such end-products as elevators/escalators, commercial food refrigerators, floor care equipment, golf and utility vehicles, material handling vehicles, and aerial lifts. By combining Kinetek’s commercial motor business with the Company’s market-leading commercial motor business, particularly in the market for motors used in air-conditioning equipment, the Company expects to expand its product offerings of commercial motors by more than double and to be in a better position to seek to become a leading player in a wider global commercial motor market. Kinetek’s strength lies in its design capabilities to meet customers’ specifications (80% of its products are custom-made) and its ability to deliver value-added solutions to customers. The Company expects that Kinetek’s design capabilities and value-added solutions will be offered to the existing customers of the Nidec Group.
Kinetek has four facilities in China with superior engineering and sourcing capabilities, which are expected to enable the Company to accelerate its ACIM business growth strategy in China and offer cost-competitive products manufactured in China in other commercial motor markets. Furthermore, by taking advantage of Kinetek’s network in India developed through its successful elevator motor business, the Company also intends to seek to achieve synergy from sales of its existing commercial motor products in the fast-growing Indian market.
The Company expects that the acquisition of Kinetek will result in a positive impact on the Company’s sales and profits on a group-wide basis.