Benchmark Electronics Inc. may think it paid too much for Avex Electronics Inc., but nevertheless, the contract electronics manufacturer has been busy integrating that company into its operations.
Benchmark, which acquired Avex from J.M. Huber Corp. last August for about $288 million in cash and stock, is now suing Huber over the price. The lawsuit, filed in federal court in Houston, claims that Huber misrepresented certain claims about Avex.
As a result, said Benchmark in the suit, it overpaid "by many tens of millions of dollars." Officials at J.M. Huber, Edison, N.J., did not return calls seeking comment.
Benchmark chief executive Donald Nigbor also declined to comment on the lawsuit. But he elaborated on the the merger of the two companies, which has been taking place over the last few months. The most visible change takes place this week, when the Avex name is replaced by Benchmark.
While the Angleton, Texas-based company may have misgivings about the price, it is not regretting the deal itself. Avex, a onetime industry powerhouse that lost substantial market share in the last few years, had two things that Benchmark lacked: a global presence, and high-volume manufacturing capabilities, Nigbor said. He noted that Benchmark's expertise has been in low- and mid-volume manufacturing projects that require a "high mix" of component configurations.
"Today, you need to be a complete solution," he said. Part of that solution for many OEMs is low-cost manufacturing, and Benchmark inherited Avex plants in Brazil, Hungary, and Guadalajara, Mexico. It also has a facility in Ireland, as well as several plants in the United States.
Nigbor hopes the diverse combination of design, manufacturing, and materials-management services will enable Benchmark to compete on a global level with such heavyweights as Jabil, SCI, and Solectron. He expects sales to approach $2 billion this year.
For now, though, Nigbor will also have to deal with several legal issues. Aside from the lawsuit against Huber, Benchmark itself is the subject of two class-action lawsuits on behalf of shareholders who invested in Benchmark between Aug. 10 and Oct. 21, when the company's third-quarter earnings were 70% below consensus analyst estimates. Benchmark denies the allegations.
Despite the distractions, former Avex employees said they look forward to working for a company dedicated to the CEM business.
"The bottom line is that these guys [Huber] were a natural-resource company," said David Hester, a former Avex employee who is now Benchmark's sales vice president. "I think we've pulled together a pretty good story."