Johnson Matthey on the acquisition trail

Electronic News, July 14, 1997 by Jim DeTar

Over breakfast recently, Nigel Davey, president of Johnson Matthey Electronics' Assembly Products group, outlined the company's aggressive growth strategy and provided a roadmap to future growth as it continues to evolve from its roots as a precious metals mining firm. Compound annual growth in the U.S. alone has averaged somewhere better than 50 percent over the last five years, and Mr. Davey said that the company has formulated a strategic plan to provide a variety of material sets in the future.

In addition to its recently-inked licensing agreement with Kyocera, Johnson Matthey has in recent years expanded its horizons with the acquisition of the Alta Group in 1992 (not to be confused with the Alta Group business of Cadence Design Systems) and Electro Alloys Corp. in 1993. In May 1994, Johnson Matthey bought a 50 percent interest in Mitsubishi Kasei, a Japan-based chemicals target manufacturing capability concern. That joint venture, dubbed RyokaMatthey, is 50-50 owned by Mitsubishi and Johnson Matthey, and to date it has been quite successful. Mr. Davey revealed that, as a result, Johnson Matthey plans to expand its position in the venture.

"In two years, we'll take a majority position, a rather large majority, which will allow us to drive it more powerfully in directions we want to drive it."

Mr. Davey made it clear that acquisition and licensing agreements are two primary weapons in the company's armory, but he also said that Johnson Matthey plans to continue its strong growth track using whatever tools are necessary.

"Acquisitions are a tool, not an end in themselves. I want to make that absolutely clear. We have our strategic intent; we look at acquisition as any other investment. If we were to go out and build a new plant or to buy a piece of equipment--it's the same sort of investment decision. It just tends to be a little bit bigger. So the strategic intent drives the business: acquisitions, joint ventures, technology licensing are all arrows in our quiver.

"Is it changing? Yes, I think it is. I think we're catching our breath this year. The last two years have been pretty heady. We're still making huge investments in things like semiconductor packaging to get ourselves up to speed, to get the volume."

So is the company currently involved in any acquisitions? "No. Are we still doing acquisitions? Yes. Every week, I sit down with my staff and we go through acquisition strategy, anything that's come up. But we're not quite as aggressive at this point in time. You've got to catch your breath after the sort of investments that we've made. Are we going to come back to acquisitions? Definitely. It's been a major, major part in our company's development."

Mr. Davey is close to being employee number one for Johnson Matthey Electronics. Back in 1983, Johnson Matthey management decided that they had a fair number of businesses in electronics, but they wanted to coordinate it all, pull it together. According to Mr. Davey, they saw an opportunity, and they decided to start a whole series of research programs to establish some core technologies within the business. Mr. Davey was hired to head up the research group in England at the time he came to Johnson Matthey back in '83. He stayed there for six years. In 1989, when JME made the third of its acquisitions in electronics, Cominco Electronic Materials, he came to the U.S. to head the coordinated effort that would become JME. Today, the company's sales are increasing rapidly as a result of these moves. Electronic News began by asking him exactly how the company is doing.

EN: What kind of sales figures does Johnson Matthey PLC have, and what kind of sales figures per annum does JME have?

Mr. Davey: "Total for Johnson Matthey PLC is 2.58 billion pounds and operating profit before taxation was 108.3 million pounds. Electronics last year did 343.7 million pounds, with profits of 30.9 million pounds. We've had pretty meteoric growth. Net revenue--because Johnson Matthey's a precious metals company, its sales figures are distorted by precious metals. So within the company, we tend to talk about net revenue, and we subtract out the cost of the precious metals. So compound annual growth rate in sales, net revenue sales, has been somewhere over 50 percent a year for the last five years."

EN: Johnson Matthey overall?

Mr. Davey: "No, Electronics. Based mainly here in the States. And 42 percent compound annual growth rate in Britain proper. So we've had fairly sustained success here. America's been very good to us, we've had a lot of success here. And it's a tribute to the American way of doing business, and frankly, the quality of the staff that we've got over here. Mainly it's come from acquisitions, and we've been very lucky. When people do acquisitions often the last thing that they think about is the people talent that they get. It's actually one of the things we take very seriously when we look into acquisitions. We have a checklist, and that's right up there."

EN: The semiconductor materials business is almost as large as the capital equipment business in sales per year. But it lacks the visibility. Would you speak to that topic?