Making Connections: Consolidation Heats Up

Electronic News, Oct 9, 2000 by Bernard Levine

Expect moves by FCI and by others in the coming months

Where will connector world consolidation strike next? Connector makers are buzzing that last week's agreement for 3M to acquire Robinson Nugent Inc. in a $115 million deal won't be the last major industry acquisition this year, with a number of top connector makers eyeing new purchases.

The need for critical mass to develop expensive new connector technologies is accelerating the consolidation in the connector industry, many industry observers noted.

Officials of second-ranked connector maker FCI Electronics confirmed in an interview with Electronic News that they hope to complete a new acquisition over the next few months. A unit of France-based Framatome Group, FCI Electronics wrestled second place away from Lisle, Ill.-based Molex Inc., but has been laying low on the acquisition front over the past two years while digesting its massive buy of Berg Electronics.

But now FCI is back on the acquisition prowl. "We sure hope to make an acquisition, although not as major as Berg," said Michel Cuilhe, president of FCI Electronics, in an interview last week in his office at FCI USA Inc. in Etters, Pa. "We are trying to either find a technology we don't have or strengthen our position in an area of the market where we have to increase our penetration," Cuilhe said. "We have a wish list but it depends on what's available," he added.

Why look today? "The integration of Berg is now done," replied Wim Adams, FCI Electronics vice president of worldwide operations. "We are working on a few acquisitions over the next few months, looking into electronic, automotive and electrical connector sectors."

Both internal growth and acquisitions are necessary, added Anton Hulsink, FCI vice president, connectors -- Americas. Critical mass is important because there are new technologies in the air that require major investments in product and process, he said. "It is not easy. You have to be a big company," said Hulsink. "In the past, small connector companies filled niches, but there are not so many niches anymore." Finding companies that are worth acquiring in terms of technology or size can be challenging, however, he added.

Other connector powerhouses are also likely in the hunt as well. Industry leader Tyco Electronics Corp., Harrisburg, Pa., has been on a buying spree in connectors and other passive components ever since the Tyco International Ltd. purchase of AMP Inc. got the Bermuda-based conglomerate into the connector business several years ago. Not finished after buying a host of companies including the electronic component operations of Thomas & Betts, Tyco is still looking for more. "We are focusing on double-digit, organic growth, and will continue to make complementary acquisitions," said Juergen Gromer, Tyco Electronics president.

Size and financial strength are crucial to developing connector products today. In a recent cost-analysis of the 2.0mm pitch connector, Ken Fleck in his Connect with Fleck column noted: "A connector manufacturer in today's world has to have deep pockets." In his column this week on page 70, the founder of Fleck Research reports connector makers are now preparing for a big push into home networking.

Meanwhile, St. Paul, Minn.-based 3M's Interconnect Solutions division in Austin agreed last week to buy Robinson Nugent, a New Albany, Ind.-based manufacturer of electronic interconnect products, for approximately $115 million, including assumption of debt.

The merger is structured as a tax-free, stock-for-stock transaction, in which each outstanding Robinson Nugent Inc. common share will be exchanged for $19 of 3M common stock, subject to certain collar provisions. The transaction has been approved by the boards of both companies and is subject to approval by the shareholders of Robinson Nugent, customary closing conditions, and regulatory reviews. The transaction is expected to close in late 2000 or early 2001, with Robinson Nugent to become a wholly owned subsidiary of 3M.