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Tech Industry

Sanmina to buy Hadco for $1.3 billion

    Sanmina (Nasdaq: SANM) will buy Hadco (NYSE: HDC) in a deal valued at more than $1.3 billion.

    After market close Monday, the contract electronics manufacturers announced a stock swap in which each Hadco share would be exchanged for 1.4 shares of Sanmina. At Monday's closing price of 50 15/16 for Sanmina, the deal is worth about $1.34 billion.

    The deal is expected to close in the third or fourth quarter of Sanmina's fiscal year, which ends in September. It will be accounted for as a pooling of interests. Sanmina expects the deal to add to fiscal 2000 earnings, excluding one-time charges.

    "We believe our merger with Hadco clearly reflects an opportunity to grow our business by satisfying the increasing demand for leading-edge interconnect technology," said Jure Sola, chairman and CEO of Sanmina. "As a result of our end-to-end solution capabilities, customer demand for our superior circuit technology has been very strong, requiring increased capacity."

    Besides boosting Sanmina's basic circuit board assembly capacity, Hadco also increases Sanmina's manufacturing in the fast-growing communications and high-end electronics markets, the companies said.

    "Importantly, the combination of our two companies enhances our ability to meet the increasing demands by our telecommunications customers for advanced optical networking technology," Sola said. "We believe this merger firmly establishes Sanmina as the global leader in printed circuit board fabrication technology."

    Although the contract manufacturing industry is growing, observers have been predicting consolidation because hardware manufacturers are concentrating more of their outsourcing in fewer players. Flextronics (Nasdaq: FLEX) recently agreed to buy The DII Group (Nasdaq: DIIG) in a transaction expected to close this month.

    Also Monday, Sanmina reported second quarter results ahead of analyst estimates. Fiscal second quarter net income of $43.9 million, or 33 cents per share, was two cents ahead of the First Call consensus.

    Second quarter revenue rose 98 percent year-over-year to $555.3 million from $281.1 million.

    "During the quarter, we experienced growth across our customer base as well as within our key target markets, with especially strong growth in our communications segment, which accounted for 79 percent of total revenues," Sola said. "The continuing build out of the Internet and demand for the latest technology in the optical networking and wireless areas is primarily driving growth in this segment. The accelerated trend in outsourcing by original equipment manufacturers is also contributing to this dynamic market."

    Shares of Sanmina rose to 51 13/16 in afterhours activity on the Island electronic communications network. Hadco closed Monday's regular trading at 60 1/2, up 7/8 for the session.

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