Bicycle chain maker KMC Kuei Meng International Inc (桂盟國際) on Friday said it plans to spend up to NT$400 million (US$13.02 million) to fully acquire China-based chain supplier Xin Meiya Chains Co (XMY, 鑫美亞), adding that the acquisition would expand its product portfolio and enhance its operational efficiency.
XMY belongs to Meile Group (美樂集團) in China’s Jiangsu Province and manufactures chains for cars, motorcycles, electric cars, bicycles and agricultural machines, its corporate Web site said.
The Chinese firm has NT$390 million in shareholder equity and in the latest fiscal year reported net operating profit of NT$8.4 million, KMC said in a filing with the Taiwan Stock Exchange.
The transaction was approved by KMC’s board of directors earlier on Friday and is to be completed on Nov. 1, company spokesman Jeter Chen (陳泳仁) said in a statement.
“In addition to the anticipated synergies created by this investment, the deal will also allow KMC to move closer to the market and our customers, creating a win-win situation for both,” Chen said.
KMC produces 80 million to 90 million bicycle chains per year, or about 70 percent of the global market, and its massive scale reduces production costs.
In 2012, KMC embarked on a global acquisition and consolidation spree, which allowed the company to offer more advanced products for a wider range of applications.
The company has seven bases of operation and eight sales offices worldwide, selling bicycle chains, motorcycle transmission components, automobile timing systems and garage-door opener segments, among others.
“This year’s investment is the first step for KMC in seeking to enlarge the group’s scale of operations,” Chen said. “Looking ahead, KMC aims to expand further into the bicycle, motorcycle, automobile and garage-door opener industries.”
In the first half of this year, KMC reported net profit of NT$508.59 million, up 19.2 percent from the same period last year, with earnings per share of NT$4.04.
Consolidated revenue increased 11.64 percent to NT$2.64 billion, but gross margin declined 2.55 percentage points to 41.36 percent over the period, company data showed.
KMC shares were flat at NT$105 at the over-the-counter Taipei Exchange on Friday. They have retreated 19.23 percent in the year to date, underperforming the benchmark TPEX, which fell 9.7 percent.
Capital Investment Management Corp (群益投顧) last month downgraded its rating on KMC from “buy” to “neutral,” saying that growth in the bicycle-sharing industry has slowed faster than the market’s expectation and that booming sales of electric bicycles have not boosted KMC as much as expected.
In a research note, Capital Investment forecast KMC’s revenue would grow 5.9 percent this year to NT$5.35 billion and net profit would grow 5.76 percent to NT$1.1 billion, making for earnings per share of NT$8.75.
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