Advantech Co Ltd (研華), the nation’s biggest industrial computer maker, yesterday said it plans to acquire a US industrial networking company for about US$1 million in cash in to boost its position in the global Internet of Things market.
Advantech said it has signed an agreement with private equity fund Graham Partners to take over B+B SmartWorx Inc, a private company with an annual revenue of about US$55 million.
This is the latest and the biggest acquisition by Advantech in its drive to seek new growth.
Advantech formed a task force five years ago to seek potential acquisition targets that would aid long-term expansion, it said.
“We have been searching for acquisition targets to expand our Internet of Things business... Taking over B+B SmartWorx would be a crucial step for the company in its expansion into the market,” Advantech president Chaney Ho (何春盛) told a media briefing.
Wireless technologies such as Wi-Fi and 4G long-term evolution (LTE) are becoming more important as they are used by Internet of Things devices, Ho said.
B+B SmartWorx has developed fiber-optic and LTE routers, which Advantech has not, he said.
Over the next three to five years, the acquisition should help boost Advantech’s industrial networking revenue to between US$200 million and US$300 million per year, making the firm the world’s largest industrial networking product supplier by market share, Ho said.
The company makes US$25 million a year from its industrial networking products, he said.
The acquisition of B+B SmartWorx would also help Advantech gain a firmer foothold in the US, Europe and the Middle East, as the company has strong brand awareness and extensive channel networks in those markets, he added.
Advantech expects a positive impact on its operations from the deal to become noticeable from the second quarter of next year, given B+B SmartWorx’s gross margin of 50 percent, compared with Advantech’s 40 percent gross margin in the first three quarters.
Advantech plans to apply for a bank loan from US lenders to use alongside its own funds to pay for the acquisition, it said.
HSBC Securities analyst Jenny Lai (賴惠娟) said in a report that she is “upbeat on the long-term outlook of Internet of Things applications and believe Adventech’s software investment would only strengthen the company’s long-term competitiveness as none of its competitors have acquired a comparable capability yet.”
Lai has a “Buy” rating on Advantech with a target price of NT$263, expecting almost 26 percent growth in the next 12 months, with the stock closing at NT$208.5 yesterday.
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