As electronics manufacturing service (EMS) providers continue to be profit-challenged, Jaco Electronics Inc. is exiting the business to focus on a segment that has been rewarding for components distributors with the knowhow: flat panel displays.
Jaco announced this week it has completed the sale of its Brandon, Vt.-based contract manufacturing subsidiary, Nexus Custom Electronics Inc. to Sagamore Holdings Inc. for $12 million and the assumption of certain liabilities.
As part of the deal, Jaco (Hauppauge, N.Y.) will remain a key supplier of components to the Nexus operation for a period of five years. Jaco plans to use the proceeds of the divestiture to reduce its long-term debt, expand its distribution business in the Far East, and explore strategic acquisitions.
Meanwhile, the company said it will use its bank lines to expand its existing flat panel display integration operation. Construction of a new 20,000 sq. ft. manufacturing facility for design, assembly, and testing of FPDs is expected to begin shortly.
"We will leverage the additional capacity to vertically integrate our FPD operation, thereby enhancing Jaco's intellectual property and our ability to provide a wide array of value-added display offerings," said Joel Girsky, chairman and chief executive officer.
The investment will "better align us with our strategic suppliers and will position Jaco as a one-stop source for customers' FPD supply and integration needs," Girsky added.