Hutchinson Technology Acquired By TDK For $126M
Hutchinson Technology Inc. has entered into a merger agreement with one of its main competitors, Tokyo-based TDK Corporation, in a deal worth $126 million.
On Monday, electronics company Hutchinson (which is headquartered in the city of the same name) announced that TDK would purchase its outstanding stock at $3.62 per share and up to 38 cents more per share depending on Hutchinson’s cash holdings at the year’s end.
Before the deal, TDK would have paid more than double the $1.75 per share that Hutchinson closed at on Friday. Instead, news of the merger doubled Hutchinson’s stock price to $3.60 as of mid-day Tuesday, close to the price that TDK said it would pay at the deal’s close.
TDK CEO Takehiro Kamigama said in a statement that his company believes Hutchinson’s “expertise and capabilities in design, development and manufacturing of high precision components will be a great addition to the TDK organization.” He added that he was pleased with the deal considering both companies “have shared a long history in the disk drive industry.”
In the year 1999, Hutchinson was producing an estimated 70 percent of the worldwide supply of suspension assemblies for every major hard disk drive manufacturer. Their market cap was valued to be $902.4 million at the time. With today’s shift in technology away from hard disks and toward flash and cloud memory, Hutchinson’s market share has fallen significantly.
Of TDK’s $8.95 billion in sales this year, roughly one-third of its business came from the product line it is best-known for in America, which includes high-quality audio and video tape, CD and DVD discs, and drives.
During Hutchinson’s 1999 peak, company shares reached $46.13, while it employed 7,284 people. By 2004, both of those numbers were halved (shares fell as low as $22.27 and only 3,900 workers remained).
In a statement, Rick Penn, CEO of Hutchinson, called the TDK merger “a compelling opportunity” for its staff and shareholders.
News of the deal was bundled with Hutchinson’s slumping fourth quarter results. Its net sales over the three month period ending September 27 fell from $70.3 million a year ago to $63.4 million, a nearly 10 percent drop.
Annual sales at Hutchinson totaled $252.8 million, down more than 3 percent compared to its sales of $261.1 million in 2014. Altogether, the company lost $39.1 million this year, which amounted to $1.20 per share.
Moving forward, Hutchinson will maintain its presence in the business of disk drive suspension assemblies as it transfers to the ownership of TDK. But in the next couple of months, Penn hopes the central Minnesota company will ship out prototypes of its Gemini OIS actuator, a component for smartphone camera manufacturing.