CVG Acquires First Source Electronics
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Commercial Vehicle Group Inc. has acquired First Source Electronics, an electronics systems integrator based in Elkridge, Md., that serves a diverse range of market segments including industrials, transportation and military — as data and power applications proliferate.
FSE had 12-month sales of $46 million as of June 30. The transaction is expected to be accretive to CVG’s operating income and earnings per share in year one, according to the New Albany, Ohio-based company.
Total cash consideration for the transaction of as much as $44.75 million — with $34 million due at closing and the balance due in 12, 18 and 36 months — is subject to meeting certain targets. The transaction was funded with domestic cash on hand and $2 million available under its revolving credit facility.
“The proliferation of digitalization, connectivity and other power and data applications present meaningful growth opportunities for CVG,” CEO Patrick Miller said in a release. “FSE strengthens our competitive positioning to take advantage of these dynamic trends, complementing our high-complexity, low- to medium-volume electrical business.”
Miller added the acquisition will create an entry into the warehouse automation market, a growing business segment. For example, in July, supermarket chain Kroger Co. announced a partnership with British online grocer Ocado Group. The two plan to build as many as 20 automated grocery warehouses in the United States to help Kroger turbocharge its e-commerce operation, Bloomberg News reported.
Miller
FSE provides electrical systems integration and manufacturing services, with specific areas of expertise in electromechanical assemblies, cable and wire harness assemblies, chassis integration, and cabinet, panel and rack assemblies.
Publicly traded CVG supplies electrical wire harnesses, seating systems and other cab-related products for the global commercial vehicle markets, including the medium- and heavy-duty truck, medium- and heavy-construction vehicle, military, bus, agriculture, specialty transportation, mining, industrial equipment and off-road recreational markets.
The company has manufacturing operations in the United States, Mexico, China, United Kingdom, Czech Republic, Ukraine, Thailand, India and Australia. Products include electrical wire harnesses and panel assemblies, trim, mirrors, wipers and controls, cab structures and sleeper boxes, and seats.
Meanwhile, CVG saw net income fall and revenue rise in its second quarter.
CVG posted net income for the period ended June 30 of $7.1 million, or 23 cents per diluted share, compared with $13.1 million, or 43 cents in the year-ago period.
Revenue climbed to $243.1 million compared with $233.3 million a year earlier.
“The new border minimum wage in Mexico, costs associated with a troubled supplier and costs associated with establishing additional manufacturing capacity are largely responsible for a decrease in operating income and, more specifically, the operating performance of the electrical segment,” Chief Financial Officer Tim Trenary said in an earnings conference call.
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For the first half of 2019, about 50% of CVG’s revenue was generated from sales to North American medium- and heavy-duty truck makers and about 20% from sales to truck makers in the global construction equipment market. The remaining revenue primarily was derived from sales to the aftermarket, original equipment service organizations, automotive market, military market and specialty markets.
