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TE Connectivity acquires Deutsch Group

by Lou Whiteman | Published November 30, 2011 at 11:57 AM

Electronic components manufacturer TE Connectivity Ltd. said Wednesday, Nov. 30, it would buy Deutsch Group SAS for €1.55 billion ($2.06 billion) as the former unit of conglomerate Tyco International Ltd. seeks to click into new markets.

Schaffhausen, Switzerland-based TE, which was formerly known as Tyco Electronics Ltd., said it has made a binding offer to buy the business from French investment group Wendel Investissement SA.

Founded in California in 1938, Deutsch is a global seller of specialty connection products used in harsh environments. The Paris-based company expects to generate sales of about $670 million in 2011. Wendel bought Deutsch from its founding family in 2006 for $1.04 billion, and expects to receive net proceeds of about €954 million from the sale.

This is the largest deal for TE Connectivity since the company was spun out of Tyco in 2007, topping its $1.2 billion purchase of ADC Telecommunications Inc. last year.

Initially following the split TE Connectivity was focused on portfolio trimming, divesting assets including its radio frequency components unit to Cobham plc for $525 million and its wireless systems division to Harris Corp. for $675 million. But the company's dealmaking strategy of late has been more focused on growth, with Deutsch expected to add a range of connectivity products used in harsh environment applications and boost its presence in the defense and transport markets.

"The acquisition of Deutsch is a major step in executing our vision to provide the most complete range of connectivity solutions for our customers worldwide," TE Connectivity chief executive Tom Lynch said in a statement. "The complementary nature of the products provided by our two companies will enable us to better serve customers in key industries, especially industrial transportation, industrial equipment, aerospace and defense, rail, and offshore oil and gas."

TE Connectivity said it would fund the purchase through existing cash and debt. The deal is subject to regulatory approvals and the acceptance of a binding offer by Wendel, which can only occur after consultation with the target's workers' councils. TE expects to close the deal in the first half of next year.

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