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TE Connectivity to Acquire Connector Manufacturer in China

Zacks Equity Research

TE Connectivity Ltd. (TEL) recently announced the inking of a deal to acquire China-based private heavy duty connector manufacturer Xiamen Delixing Electric Equipment Co., Ltd. and Xiamen SIBAS Connectors Co., Ltd. The acquisition, expected to close in fiscal 2015, will be added to TE Connectivity's Industrial Solutions segment.

TE Connectivity’s Industrial Solutions is one of the leading suppliers of electronic components, like connectors, relays, circuit protection devices, antennas and heat shrink tubing. The products under this segment are used in the industrial machinery, consumer devices, data communications and household appliance markets among others.

Xiamen Delixing Electric Equipment and Xiamen SIBAS Connectors business have regional expertise in providing advanced connectors for diverse applications in areas like machinery equipment, factory automation, power management as well as railways.

TE Connectivity has been leveraging its robust financial position to broaden its presence in the harsh environment applications industry. In the last quarter the company closed the acquisition of SEACON Group and announced its decision to acquire Measurement Specialties Inc., both of which will enhance the company’s offerings for harsh environment applications. Though the company has kept the financial terms of the transaction under covers, the aforementioned deal is likely to be significantly beneficial to its business.

The two companies are expected to complement each other, both technologically and geographically. In fiscal 2013, TE Connectivity reported total revenues of approximately $13.3 billion, of which $2.2 billion was from its businesses in China whereas Xiamen Delixing Electric Equipment and Xiamen SIBAS Connectors reported total sales of $10 million in 2013.

This acquisition is likely to further broaden TE Connectivity’s presence in the region, especially in the domain of connectivity solutions for harsh environmental conditions. The combined technological and geographical reach of the two companies will significantly expand the company’s operational capabilities in the industry.

Xiamen Delixing Electric Equipment and Xiamen SIBAS Connectors will also benefit from TE Connectivity’s strong foothold and an extensive experience in regions other than China.

Zacks Rank

TE Connectivity currently has a Zacks Rank #3 (Hold). Some other stocks that look promising in the industry include Park Electrochemical Corp. (PKE), Nidec Corp. (NJ), and InvenSense, Inc. (INVN). While Park Electrochemical sports a Zacks Rank #1 (Strong Buy), both Nidec Corporation and InvenSense carry a Zacks Rank #2 (Buy).

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