TTM Technologies, Inc. (NASDAQ: TTMI) has signed an agreement with Griffon Corporation (NYSE: GFF) to acquire Telephonics Corporation, a specialist in providing communications, intelligence, and surveillance solutions.
The acquisition, valued at $330 million, will be funded entirely with cash in hand. The completion of the transaction, expected in the ongoing quarter of 2022, is contingent upon the receipt of regulatory approvals and fulfillment of customary closing conditions.
Shares of TTM Technologies showed no movements on Monday. The stock was last trading at $13.61.
TTM Technologies is a manufacturer of printed circuit boards, which are used in industrial, automotive, medical, and other industries. The company has headquarters in Santa Ana, CA.
Rationale Behind the Acquisition
The buyout will enhance TTM Technologies’ product offerings and customer base in the aerospace and defense industry, especially in the surveillance, engineered system solutions, communications, and radar systems arena.
Further, the transaction is expected to boost the company’s technological expertise. With this buyout, TTM Technologies’ aerospace and defense businesses are anticipated to generate nearly 40% of the total revenues in the years ahead.
The President of TTM Technologies’ Aerospace and Defense business unit, Cathie Gridley, said, “This acquisition positions TTM with full vertical integration capability from printed circuit board to highly sophisticated OEM solutions to better meet our Aerospace and Defense customer needs.”
TTM Technologies anticipates that the Telephonics buyout will enhance its earnings per share (non-GAAP) immediately. Also, cost synergies of $12 million are expected by 2024.
Official Comments
TTM Technologies’ CEO, Tom Edman, said, “We expect that the complementary portfolio and skills will enhance TTM’s strategic capabilities and growth opportunities enabling us to deliver significant benefits to our Aerospace and Defense customers.”
Stock Rating
Recently, William Stein of Truist Securities maintained a Hold rating on TTM Technologies while increasing the price target to $15 (10.21% upside potential) from $14.
The company has a Moderate Buy consensus rating based on one Buy and one Hold. TTM Technologies’ price forecast of $15.50 suggests 13.89% upside potential from current levels. Over the past year, shares of the company have declined 9.5%.
Risk Analysis
The TipRanks Risk Factors tool reveals that TTM Technologies stock is at risk mainly from two factors: Finance & Corporate, and Production. The categories contribute seven risks each to the total 37 risks identified for the stock.
Conclusion
Although the buyout is expected to put pressure on TTM Technologies’ cash reserves, it will better position the company to get leverage from higher spending on defense electronics in the years ahead.
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