Less than two weeks after the completion of its $1.85 billion acquisition of Berg Electronics Inc., Framatome Connectors International has merged the company into its electronics group and named a former Berg executive to run it.
Kerry Krafthefer, formerly Berg's executive vice president of operations and a 24-year connector-industry veteran, is now president and general manager of FCI Electronics Worldwide. Krafthefer will coordinate the consolidation of FCI and Berg from FCI's U.S. headquarters in Fairfield, Conn.
The Berg acquisition, the largest ever in the connector industry, makes FCI the world's second-ranked connector maker, with 1997 combined sales of nearly $1.7 billion-slightly ahead of Molex Inc.'s sales of about $1.5 billion, and well behind AMP Inc.'s 1997 sales of more than $3.8 billion.
Despite the size of the combined entity, the Berg merger affects only one part of FCI's broader operation, and organizational similarities between the two should make for a smooth transition, said Philippe Anglaret, FCI's chairman and president.
"When we are talking about the merger between FCI and Berg, we are actually talking about merging our electronics business group with Berg," Anglaret said in a telephone interview from his office in Paris.
FCI divides its business into five strategic groups, focusing on the electrical, automotive, interconnection, microelectronics, and electronics segments of the connector market. Each group is further broken down into divisions covering specific regions, which mirrors Berg's organization, Anglaret noted.
"Our electronics group is organized exactly as Berg was organized, in three divisions by region; so we are really merging the three divisional organizations, which cover electronics for the Americas, Europe, and Asia," Anglaret said. And like Berg, FCI's electronics group serves the telecom, datacom, and consumer markets.
Part of Krafthefer's role will involve consolidating the production of FCI and Berg products among the companies' existing plants.
"FCI has eight plants in the U.S., of which two are within the electronics group," Anglaret said. "Both are in Pennsylvania, very close to Berg's five plants in Pennsylvania."
For the next few months, the companies will continue to use the Berg name, but it will eventually be phased out, FCI said.
Industry analysts have noted that little product overlap exists between the two companies, and Anglaret said he does not anticipate closing any of Berg's operations.
"We do not, at this point in time, have any plans to close any plants," he said. "What we will do is reorganize the production of the various product lines between these plants."
Analyst Ron Bishop of Bishop & Associates Inc., St. Charles, Ill, pointed to minimal redundancies between the two companies as just one of a number of factors that make them "an outstanding fit."
"What's really interesting about the acquisition is that there was some overlap, but it's insignificant," Bishop said.
Both companies have 2-mm product families-Berg's Metral and FCI's Millipacs line. But Bishop said there is a good chance the merged business will be able to integrate those product lines and further strengthen its position in the market.
"If they can combine the engineering strengths of those two groups, it will probably turn out to be a win also," he said.
Both companies had a worldwide presence, but each had more strength in its home market. The Berg deal has significantly bolstered FCI's strength as a global player, Anglaret said.
"FCI was covering the whole world, but we were really strong in Europe," he said. "In the same way, Berg was a global company, but very much focused on the Americas. By combining the two, what we have is a very well-balanced operation in terms of global and regional organization."
With Berg in its fold, FCI's sales will be 40% in North America, 40% in Europe, and 20% in Asia, Anglaret said.
And that kind of global presence puts FCI in a very good position to compete with the larger, multinational OEMs for market share, Bishop noted.
"The impact on FCI and their customers is significant," he said. "It gives them more resources to compete more effectively against companies like AMP and Molex, who are very well-managed global companies."
The Berg acquisition also enhances FCI's strength in the datacom and telecom markets, in which the company expects to see substantial growth, Anglaret said.
"I think we have basically the same strategy within Berg and FCI," he said. "We are targeting the telecom and datacom market, and we both have very strong accounts in that business. So combining the two will make a very strong force for the telecom industry."
Overall, each of the companies' respective strengths will have far-reaching effects on the industry as a whole, according to Bishop.
"It just strengthens FCI and Berg, and it benefits their customers in a significant way," he said. "It gives the customers a third company that has a lot of muscle and a lot of manufacturing and engineering capability."
And that, Anglaret said, is precisely what FCI had set out to do.
"The combined strengths of FCI and Berg will really allow us to better service our customers," he said. "That is what is very important for us."
On the distribution front, executives don't expect major changes.
"I see it as being very positive for distribution," said Lewis LaFornara, vice president of distribution for FCI Electronics. He noted that Berg and FCI have been using some of the same distributors, including heavyweights Arrow Electronics Inc. and Future Electronics Inc.