Laminate Companies: On the Move

It took until the second business day of the new year for the chips to start falling in the US printed circuit laminate industry.  On the same day, Isola changed hands and Park Electrochemical announced it was putting its PCB unit up for sale.

As the East Coast braced for a winter blizzard of epic proportions, Park Electrochemical sent a cold shiver down the spines of more than a few industry observers with its announcement of a “strategic evaluation” of its core printed circuit materials business, one that could result in a sale.

Park has been paring its PCB operations over the past few years amid falling revenues and tighter margins. Said revenues have been falling despite a rebound in the overall PCB market: Even as aerospace revenues have grown, overall Park sales have fallen year-over-year in 10 of the past 11 quarters, more than half the time by double digits.

Although it generates most of its revenue from the PCB materials unit, sources indicate the firm sees more upside in its aerospace materials division, which isn’t as susceptible to the commodity pricing pressures of board-level laminate. The sale or closure of the division could further disrupt the North America supply chain, however.

Park’s long history is heavily intertwined with that of the North American PCB industry, and one of the last remaining “family” firms. Cofounded in 1954 by Jerry Shore, his son Brian is now CEO and grandson Ben a senior vice president. Its sale, whenever that day comes, will truly mark the end of an era.

Meanwhile, in Arizona, Isola completed the transfer of its equity ownership to an investment group led by Cerberus Capital Management. This deal was not a surprise: Isola had reportedly been trying to restructure a debt load of more than half-a-billion dollars since last summer.

Isola was primarily owned by the investment firms TPG Capital and Oaktree Capital Group. It’s unclear at present how the stakes in the company are now divided. No doubt Isola won’t be one of the bidders for Park, however.

Couple this with the changes at Arlon over the past two years, and the US laminate industry continues to be in flux. Many of the other major players appear stable: Kingboard, Shengyi Technology, Nanya, Panasonic, Ventec (which merged with TMT in 2016). Among US-based vendors, Rogers’ position at the high-end has enabled it to remain financially sound. It may be the only one.

Demand for lower-tech materials isn’t enough to sustain footprints in higher-cost markets. M&A can result in stronger, more viable companies. Let’s hope that the future for Park (or whomever buys it) and Isola are brighter than the present, as the North American supply chain depends in large part on their success.

Jan. 5 update: Investment bank Needham & Co. says the Electronics unit could bring $50 million to $80 million in a sale.

How the Chips Have Fallen

The history of consolidation in the semiconductor industry, in one slide:

Source: Fortune

Mentor in Play

With Mentor stock being bought up by hedge funds (again) and the CAD company having gone so far as to enlist an outside banker to provide M&A advice, expect a lot more of this in coming months.

One thing to keep in mind: If Dassault or Siemens were to buy Mentor, what would that do for Altium and its owners’ exit strategy?

Will Juki-Sony Talks Get Others Going?

Industry chatter has long said M&A activity among the major placement companies is inevitable.

Yet throughout the gut-wrenching downturn of 2001-02, the widespread pause in 2008-09, and the subsequent fallout starting last spring, nothing concrete took place.

Sure, a few companies have changed hands — Mydata was bought out by Micronic, Dover divested Universal Instruments to Francisco Partners, which in turn sold it to Patriarch Partners, ASM took Siplace off Siemens’ hands, and H2 Equity Partners did the same for Philips with Assembleon.

But there are more than 25 pick-and-place OEMs around the world, and despite fierce competition the number is actually growing.

Today, Juki and Sony announced the signing of a non-binding memorandum of intent to discuss the possible integration of their respective surface-mount technology equipment and related businesses. Will this finally get things rolling?

Under the MOI, Sony and Juki would integrate their SMT businesses under a newly established company, whose name is yet to be disclosed. Both companies are ponying up cash for the “startup,” Juki presumably providing the lion’s share as stands to receive two-thirds of the shares in the new venture.

The deal could be consummated by September if everything holds up.

It’s unclear what a merged entity’s worldwide market share would be, but I suspect it would be the largest in the world. Juki currently is neck-and-neck with Yamaha and Fuji in Asia, and is probably the current leader for new units sold in the US. Sony hasn’t been able to penetrate the US, but has done well in Mexico, where many Japanese OEMs have or had larger factories. It also sold thousands placement machines to Foxconn, reportedly as part of a an arrangement under which Sony outsourced production of various consumer electronics. Latin Americas is up for grabs. Siplace and Assembleon continue to hold sway in Europe, but others have made inroads of late.

This could also affect Juki’s deals as a full-line distributor for other suppliers. Sony currently makes everything from screen printers to placement machines to AOI. Juki resells printers (GKC) in the Americas and Europe, as well as various soldering equipment lines.

The bigger question, however, is will this spur other M&A? Not many companies align so neatly as Juki and Sony. So while many placement companies have been on the block for some time, and the lure of better share, less competition and — hopefully — greater margins is always on the CFOs’ minds, the merging of differing technology, approaches and cultures (not to mention the acquisition price) haven’t been enough to seal any deals thus far. And we don’t see that changing any time soon.