Eltron International Inc., a Simi Valley manufacturer of bar-code label printers, software and accessories, last week signed a letter of intent to merge with Zebra Technologies Corp. of Vernon Hills, Ill.
The stock transaction, pending regulatory approval, is valued at about $680 million. As separate companies, Eltron is valued at about $300 million and Zebra Technologies at $600 million.
At the time of the transaction, Eltron shares were trading at $33.50, with 7.8 million shares outstanding; Zebra, a manufacturer of higher-end bar-code systems, was trading at $28 per share, with 24 million shares outstanding. Each share of Zebra Technologies will be exchanged for 0.84 of Eltron's shares, with Zebra owning about 72% of the combined company.
Donald Skinner, chairman and chief executive of Eltron, will become president and chief executive of the combined company, and Edward Kaplan, chairman and chief executive of Zebra Technologies, will serve as chairman.
"It's a true merger of equals, which means we have simply combined the two businesses," said Daniel Toomey, Eltron's vice president and chief financial officer. "One of the things that differentiates us from other mergers is typically one or both companies are unhealthy. In our case, we are both healthy."
For the third quarter ended Sept. 30, Eltron posted net income of $2.7 million on sales of $24 million, compared with net income of $1.8 million on sales of $14.3 million in 1995.
Eltron produces thermal label and plastic card printers, printing systems, software and accessories used in the health care, retail, manufacturing, package-delivery, financial services and security industries. Bar-code systems commonly are used to track items during manufacturing and shipping.
The company's clients include United Parcel Service and SmithKline Beecham Clinical Laboratories. Zebra Technologies manufactures high-end, high-volume systems that, through its distributors, are sold to larger companies such as Mercedes-Benz and Ford Motor Co.
Toomey said the deal will place Eltron in a better position to take advantage of an expanding market.
"As our industry has developed, we have developed into a leadership position in the low end of the market, while Zebra has been a defining player at the high end of the market," Toomey said. "The real advantage for us will be the broader pool of engineering talent that will be available, allowing us to bring more products to the market."
The low-end systems are priced under $1,000. High-end systems range from about $1,200 to $7,500.
Toomey said both companies, which do not compete for the same clientele, will continue to operate their separate manufacturing plants. He expects little, if any, job loss.
Charles Whitchurch, chief financial officer of Zebra Technologies, said the companies are a good fit.
"I think overall it is an exciting opportunity for both companies. What we've created is a situation where both companies operating together can grow faster than either would separately," he said. "We can take Eltron's low-cost printers and sell through our international channels. They can take our performance line printers and sell to their customers."
Eltron's planned merger with Zebra Technologies follows a merger earlier this year with RJS Inc. of Monrovia, another high-end manufacturer of bar-code systems, printers and products. That exchange of stock was valued at about $12 million.