GenTek Inc. (OTC Bulletin Board: GETI) announced today that its Noma Corporation subsidiary has acquired a wire-harness and subassembly manufacturing business located in Reynosa, Mexico, from Whirlpool Corporation (NYSE: WHR).
As part of the transaction, Noma has entered into a seven-year agreement to supply wire harnesses, panel assemblies, copper tubing and related components to Whirlpool’s North American appliance production facilities. GenTek expects that this supply agreement will result in an increase of approximately $120 million in annual revenue.
“We are very pleased to have this opportunity to greatly expand and strengthen our relationship with Whirlpool in product lines that are central to Noma’s strategic growth plan,” said Ray L. Patel, Noma’s president and CEO. “The Reynosa facility will enhance Noma’s position as a leading supplier of wire harness and related subassemblies for the appliance, electronic and automotive markets.”
The purchase price of $8.4 million, which may be subject to post-closing adjustments, includes $4.0 million in cash and a $4.4 million note payable in 4 installments over 40 months. The assets acquired by Noma include inventory, fixed assets and the stock in Whirlpool de Reynosa, S.A. de C.V. The Reynosa facility, which employs approximately 3,000 people, is a state-of-the-art facility that was constructed by Whirlpool in 2003 as a means to consolidate the operations of three facilities.
The acquisition of the Reynosa operation is expected to result in the following strategic benefits to GenTek and Noma:
— further establishes Noma as a premier provider of wire harnesses and subassemblies to the appliance, electronic and automotive markets;
— more than doubles Noma’s appliance and electronic annual revenues with minimal upfront investment;
— ensures that Noma’s long-standing relationship with Whirlpool remains strong well into the future;
— provides significant flexibility to realize future cost savings throughout Noma’s existing appliance, electronic and automotive wire-harness business.
GenTek expects that the addition of the Reynosa operation will be neutral to GenTek’s net income and operating cash flow during the first year of operation, with the contribution to net income and operating cash flow expected to increase after the first year of transition.
“This transaction is an important step in GenTek’s continued efforts to sharpen its focus on growing the core businesses within its manufacturing and performance products segments,” said Richard R. Russell, GenTek’s president and CEO.