KEY POINTS:
GPS technology maker Rakon has done some global positioning of its own by buying a European firm.
The listed company is also eyeing opportunities in Asia.
Rakon, which makes high-performance crystals and oscillators, has agreed to buy the Frequency Control Products (FCP) business of UK-based C-MAC MicroTechnology.
Rakon
supplies the global positioning systems market predominantly in North America and Asia.
FCP - with 233 staff and manufacturing operations in the UK and France and offices in China and the US - has a stronger presence in the European communications market. Rakon will buy the business for US$37 million ($54 million) but rather than fund the acquisition using debt it will raise $60 million from an equity placement.
Managing director Brent Robinson said the placement decision kept the options open for low-cost manufacturing developments in China or India. "As the consumerisation of GPS moves forward obviously the price is going to be more and more important and we've been preparing for that and looking at opportunities in Asia."
Rakon also raised its earnings forecast after strong demand for personal navigation devices over the Christmas period. Earnings before interest and tax for the year ending March 31, excluding FCP, was expected to exceed $16 million, compared to previous guidance of $14.8 million.
Shares went on a trading halt yesterday to allow a book build and placement among investors. Up to 16 million shares will be available depending on the issue price, with a starting book build price of $3.75. Rakon's shares closed at $4.35 yesterday, compared to an issue price of $1.60.
ABN Amro Craigs research analyst Mark Lister said he thought the placement would be well supported.
"It looks like they got [FCP] for a pretty good price," Lister said. "It just looks pretty good from all angles." Warren Couillault, chief investment officer of 10 per cent shareholder Fisher Funds Management, said it looked like a promising acquisition.
"They're pretty exposed to GPS device manufacturers and this company's very exposed to telecommunications, so its quite a good sector spread," Couillault said. The move could also be defensive to prevent a competitor buying FCP, he added.
The purchase of FCP would increase Rakon's global sales coverage, enhance its product range and increase penetration of high growth markets, the company said.
FCP's revenue for the year ending August 31 was $63.8 million, with a trading profit of $7 million.
Frequency control products
* Division of UK-based C-MAC MicroTechnology.
* Makes quartz crystal oscillators.
* Supplies telecommunications, aerospace and satellite location sectors.
* Manufacturing operations in UK and France.
* Employs 233 people.