MUNICH, Germany Electronic component vendor TDK (Tokio) plans to merge its passive component business with its German competitor Epcos AG (Munich, Germany). The Epcos management supports the plan. Both brands will be continued, the companies said.
Top managers of both companies signed a 'Business Combination Agreement' (BCA) that provides for the merger of TDK and Epcos. The move will create a leading manufacturer of passive components with strong presence across customer industries and regions, Epcos said in a press release.
TDK has submitted an offer to Epcos shareholders that valuates the company at 1.2 billion (about $1.87 billion) and represents a price premium of 52 percent over the average share price of the past quarter. In case the offer is successful, TDK plans to spin off its passive component business which makes up for about one third of the company's revenue, and merges it with Epcos. The new, combined business unit will be named TDK EP Components KK.
The BCA also sets rules as to the power structure in the new company. Epcos' interests will be represented by two board members, TDK will have three. The Epcos managers will have a veto right with respect to significant structural changes within their part of the group. Epcos keeps its headquarters in Munich; all of its business divisions remain untouched. The same is true for the respective brands; the products will continue to be sold under the TDK and Epcos brand, respectively.
Since the product spectrums do not overlap much, the move will not create a lot of synergies on the cost side, a TDK spokesperson explained. "We simply complement one another ideally," the spokesperson said. For this reason, no major job cuts are to be expected, he added. "The move will strengthen our combined competitiveness. We intend to grow together," the spokesperson said.
While TDK is active in the consumer and IT business, Epcos is much more oriented towards automotive and industry customers. In addition Epcos's product spectrum addresses the mobile handset and consumer electronics industry with specific RF filter products.
The merger is subject to approval by the TDK shareholder's meeting as well as by the respective local antitrust authorities. TDK expects the transaction to be completed by October.
At the same time with the merger plans announcements, Epcos has submitted its Q2 figures. The company's sales stagnated at 362 million as operating profit of 28 million rose by 8.5 percent.