Will Benchmark Electronics’ announced purchase of Pemstar set off a buying spree among EMS companies?
Benchmark is paying roughly $300 million for Pemstar — about one-third of the company’s $871 million in sales over the four periods ended June 2006. However, Pemstar comes with roughly $125 million in debt (not including accounts payable) and lost a cumulative $5.7 million during the past four quarters. Some restructuring will likely be in order to eliminate manufacturing redundancies in Minnesota, Texas, Ireland, Sinagpore and Thailand.
The buy, though large, won’t boost Benchmark’s place in the global EMS rankings. The company remains eighth, well behind No. 7 Elcoteq. In itself, I would not expect this to spur competitors to make moves.
However, corporate America is sitting on enormous piles of cash. I could certainly see one or two other large deals, including one of near-seismic proportions, in the coming months.