Major contractors gobble up board operations

Electronic News, March 2, 1998 by Bernard Levine

New York--It was another busy week on the contract manufacturing front, with new acquisition deals surfacing, and earlier deals consummating. Madge Networks, Celestica, Sanmina, Pragmatech, Lockheed Martin and Benchmark were heard from last week, as OEMs continue to unload board operations, and major contractors eagerly buy them up to add muscle.

Madge Networks will turn its Dublin, Ireland manufacturing unit over to Celestica, forming a strategic relationship with the contract manufacturer to make its Token Ring and ATM products there. Under the terms of the agreement, ownership of the operation will transfer to Celestica; full terms were not disclosed.

The purchase of this unit provides Celestica with its first operation in Ireland and significantly expands its presence in Europe. The facility currently specializes in printed circuit assembly and system build of Madge Token Ring products. The business will continue to manufacture Madge products and will be expanded to service other customers. The present management team will continue to lead the operation and all current employees will be retained by Celestica.

Celestica's president/CEO, Eugene Polistuk, said "The purchase of this operation extends Celestica's business relationship with Madge Networks, and also helps us better serve other current and future customers."

Toronto-based and expansion-minded Celestica will soon gain its first Mexican facilities through a purchase from Lucent Technologies (EN, Feb. 23).

Meanwhile, Sanmina has signed a definitive agreement to acquire fellow contract manufacturer Pragmatech. Both are in San Jose.

"As a result of the transaction, Sanmina's manufacturing capacity will expand significantly, allowing it to more efficiently serve the increasing demands of its California client base," Sanmina said.

"Founded in 1983, Pragmatech, which is privately held, has one of the largest and most sophisticated surface-mount assembly operations in California having invested over $30 million in capital equipment."

The total of the cash purchase price earmarked for Pragmatech shareholders and the amount of Pragmatech's outstanding debt is approximately $31 million. "As a result of this acquisition, Sanmina will have the second largest contract manufacturing capacity in California, rising from our current sixth ranking," said Jure Sola, Sanmina's chairman/CEO.

Also, Lockheed Martin has completed the sale of its Commercial Electronics subsidiary to contract manufacturer Benchmark Electronics, Inc., of Angleton, Texas. Under the terms of the agreement announced in January, Benchmark acquired the stock of Lockheed Martin Commercial Electronics in Hudson, N.H. for $70 million in cash, a portion of which was funded by bank debt. Lockheed Martin Commercial Electronics, an operating unit of Lockheed Martin Electronics Sector, is one of New England's largest electronics manufacturing services companies.