Elektron sees synergistic advantages in Arcolectric acquisition - Embedded.com

Elektron sees synergistic advantages in Arcolectric acquisition

London, UK — Elektron, the electronic component and high frequency electronics manufacturer and distributor, has acquired the trade and some assets from the receiver of Arcolectric (Holdings) and Arcolectric Switches.

The company is paying £352,000 in cash and assuming of £1,515,000 of lease finance debt repayable over five years to be secured by a floating charge over the assets purchased from Arcolectric Switches.

Elektron has three operating subsidiaries, Bulgin Components, a manufacturer of industrial connectors, switches, fuse holders, battery holders & filters; BP Components, a distributor and supplier of hard to find electronic components; and Milmega, which supplies RF/microwave solid state high power amplifiers and systems

The board of Elektron believes that “the acquisition of Arcolectric is a unique opportunity to acquire a substantial business at a low price from a receiver with extensive market, manufacturing and distribution synergies between Arcolectric and Elektron' s existing subsidiary, Bulgin Components”.

It has acquired the plant, machinery, fixtures, fittings, tooling and stocks sufficient to continue the business of Arcolectric Switches which operates from an 80,000sq ft facility in West Molesey, Surrey employing 170 staff. The company manufactures appliance switches, indicator lights and fuseholders for use in domestic appliances and industrial applications.

Arcolectric Switches reported an operating profit of £19,000 on turnover of £13.9million in its last audited accounts to 31 December 2001. Unaudited accounts for the year ended 31 December 2002 show an operating loss of £242,000 on sales of £14.2million. In the ten months to 31 October 2003, the management accounts show an operating loss of £1.4 million on sales of £12.3 million.

It exports 75 per cent. of its products to over sixty countries word-wide including the US, China and Turkey and at the time of acquisition had an order book of £2.3million.

Elektron has also acquired from the receiver the entire issued share capital of Arcolectric Holdings' US distribution subsidiary and 99 per cent of its manufacturing subsidiary in Tunisia. Elektron has an option to purchase 100 per cent. of the subsidiary in Hong Kong which owns a Chinese manufacturing facility.

The US operation distributes Arcolectric Switches products and employs ten staff. In the year ended 31 December 2002 it made audited operating profits of US$391,000 on sales of US$4.4 million.

To fund the acquisition of Arcolectric together with its working capital requirements Elektron is securing £500,000 in cash through the acquisition of Aridmark Limited from Panther Securities Plc for 9,090,909 new Elektron ordinary shares of 5p each of the Company. Following the issue of the shares for the acquisition of Aridmark, Panther Securities will hold 13.96 per cent. of the enlarged issued share capital.

There is also a loan from Panther of £975,000 to be released at the option of Panther or Elektron. Elektron has exercised its option for release from the loan in return for rental on Switches' UK leasehold premises in Surrey being £417,000 per annum.

Negotiations are at an advanced stage to raise an additional £600,000 in new equity on substantially the same terms as for Aridmark Limited.

Earlier in December Elektron gained £200 000 in cash through a deal to buy Eastchart J Kinder for 4 million Elektron ordinary shares.

At its AGM on 11 December, Ronald Bulgin was not re-appointed as a director of the company leaving two executive directors, Adrian Girling, who was appointed executive chairman in January 2003 and Christopher Leigh who continues as finance director.

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