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Wyle Electronics Will Be Bought by German Firm

Acquisition: Veba AG agrees to pay $810 million for 9th-biggest O.C. public company, where no major changes are expected.

July 04, 1997|PATRICE APODACA | TIMES STAFF WRITER

IRVINE — Wyle Electronics Inc., a major semiconductor and computer parts distributor and one of Orange County's largest companies, said Thursday it has agreed to be acquired by the giant German industrial concern Veba AG for $810 million in cash.

The deal was portrayed as a strategic move that would create an electronics distribution powerhouse with global reach and sales of about $3 billion annually.

Joining Veba "gives us the capability to serve customers on a global basis, with every increasing complexity of the programs and services that our customers are demanding," Wyle Chief Executive Ralph L. Ozorkiewicz said.

Wyle, the ninth-largest publicly traded company in Orange County, earned $40.2 million on sales of $1.24 billion last year. It has 1,700 employees, 500 of them based at its headquarters in Irvine. It also has plants in Santa Clara and Phoenix.

Veba is paying $50 a share, a 40% premium over the average trading price of Wyle's stock in the last 90 days.

On Thursday, Wyle's stock surged $6.50 a share to $49.31, a 52-week high, on the New York Stock Exchange.

The new owner isn't expected to make major changes at Wyle. Veba is known for its hands-off style with the companies it acquires, preferring to let local management call the shots.

Wyle would become a unit of Veba's Raab Karcher subsidiary. But the Wyle name, headquarters and work force will remain intact, the companies said.

Veba is the fourth-largest company in Germany, with about $50 billion in annual sales and interests in electric power, chemicals, oil and transportation. In the United States, it owns a smaller electronics distributor, Insight, in San Diego, but Wyle would represent its biggest investment here so far.

Analysts said that an ongoing consolidation in the industry no doubt motivated Wyle to join forces with a bigger company. "The companies are trying not only to get bigger, but more global," said Shelby A. Fleck, an analyst at Morgan Stanley & Co. in New York.

Wyle is an attractive target, she said, because it distributes a solid lineup of products from Intel, Texas Instruments, Motorola, National Semiconductor and other well known names.

The deal gives both companies something they each lack, analysts said. Veba wants a bigger presence in the United States. And Wyle, while expanding its reach to foreign markets in recent years, has remained largely a domestic supplier.

"It slips Wyle into a global company with access to products it did not have, and provides Wyle with access to global markets it did not have," said analyst Steven M. Ashley at Robert W. Baird & Co. Inc. in Milwaukee.

Wyle was founded in 1949 as Wyle Laboratories, an El Segundo-based provider of testing and engineering support for the aerospace industry. It started the electronics distribution business in the early 1980s, and that grew to be the larger and healthier part of the company.

In 1993, Wyle moved its headquarters to Orange County, where the electronics group was based. The following year it sold the aerospace-related business and changed its name. It is now the world's sixth-largest electronics distributor. Combined with Raab Karcher, it will leap to third behind Arrow Electronics and Avnet Inc.

Wyle's role in the electronics food chain is middleman. In many cases, big semiconductor makers such as Texas Instruments don't sell directly to end users, instead using distributors like Wyle, who take on the burden of packaging and shipping the products.

Besides computers, the semiconductors and computer products Wyle sells wind up in a variety of products, including workstations, printers, video conferencing systems and medical instruments.

Wyle was hurt last year when a buying frenzy by manufacturing companies led to a subsequent drop in orders as the firms worked through supplies. It was also dealt a blow when Advanced Micro Devices Inc. dropped Wyle for another distributor.

But it has since recovered from those setbacks, analysts said. Wyle's profit slumped 29% in the first quarter to $7.8 million from $11 million a year earlier, but the decline was attributed to the short-term effects of shifting its semiconductor product lines.

Ozorkiewicz, 50, who announced in May that he will retire because he has multiple sclerosis, said that Wyle has stopped its search for his successor. Veba is expected to appoint a new chief executive when the acquisition is completed next month.

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Wyle Goes to Market

The sale of computer parts distributor Wyle Electronics Inc. is another step in the ongoing consolidation of that industry. The company's sales and earnings have both increased boisterously and the stock price, which had been inching along in the mid-30s, had blasted to a 52-week high of nearly 50 when financial markets closed Thursday.

Wyle Electronics Profile

Business: Computer parts distribution

Location: Irvine

President/chief executive: Ralph L. Ozorkiewicz

Total employees: 1,700

Buyer: Veba AG

Sale price: $810 million in cash, or $50 per share

Sales (millions)

1992: $453.4

1993: 473.4

1994: 792.3

1995: 1,077.5

1996: 1,244.5

Net income (millions)

1992: $9.7

1993: 8.1

1994: -0.4

1995: 36.2

1996: 40.2

Stock Closing Prices

May 9: $36.00

May 16: 36.00

May 23: 37.63

May 30: 37.00

June 6: 37.13

June 13: 37.63

June 20: 36.63

June 27: 36.88

July 3: 49.44

Quiet Giant

Although not a high-profile concern like some of Orange County's other major employers, Wyle is, nonetheless, a local powerhouse. Top county public companies, ranked by 1996 revenue:

Revenue

Company / City (billions)

1. Fluor Corp. / Irvine: $12.1

2. Ingram Micro Inc. / Santa Ana: 12.0

3. Rockwell Intl. Corp. / Seal Beach: 10.6

4. Bergen Brunswig Corp. / Orange: 10.4

5. PacifiCare Health Sys. / Cypress: 4.8

6. Western Digital Corp. / Irvine: 3.9

7. AST Research Inc. / Irvine: 2.1

8. First Amer. Financial / Santa Ana: 1.6

9. Wyle Electronics / Irvine: 1.2

10. Apria Healthcare Grp./ Costa Mesa: 1.2

Sources: Bloomberg, Times reports

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