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Power-tools maker Techtronic Industries is set to acquire the North American power-tool business of Japan's Ryobi for about US$95 million.

The proposed acquisition was expected to double Techtronic's revenue next year, executive director Frank Chan Chi-chung said.

'The final price will be determined after we receive the list of assets from Ryobi,' Mr Chan said yesterday.

It will be based on the net book value of the operation's tangible assets and without any premium or discount.

However, 'under our conditional agreement, the price in any event will not exceed US$123.3 million,' he said.

The power-tools business of Ryobi is controlled by Tokyo-listed Ryobi which produces die-cast and finished goods such as printing and power equipment.

The brand's power tools include drills, screwdrivers, hammers, grinders, saws and sanders and account for about 20 per cent of the North American market.

Mr Chan said the company had sales of nearly US$400 million in North America last year. Techtronic last year had turnover of HK$2.7 billion.

Mr Chan said the deal could also widen the company's product range by bringing in corded and bench-top power tools business as well as the related technical know-how which Techtronic did not have.

At present, more than 90 per cent of the company's business is either OEM - original equipment manufacture - or ODM - original design manufacture - of cordless power tools and floor-care products such as vacuum cleaners.

'After the acquisition, we will have a brand name and the technology to make corded power tools,' chairman Horst Pudwill said.

Brand-name products could generate a more stable revenue stream for the company as well as produce a profit margin which in general would be about 5 per cent to 6 per cent higher than that of OEM and ODM, Mr Pudwill said.

'That will elevate us to the next step,' he said.

However, the deal could create a financial burden for the company.

Mr Chan said the acquisition would be funded from Techtronic's internal resources and bank loans.

At present, Techtronic Industries holds about US$40 million cash in hand. Mr Pudwill admitted the acquisition would reverse the company's existing zero-debt position and give it a gearing ratio of 60 per cent or 65 per cent.

However, he considered the deal was well worthwhile because it would double the company's revenue.

'For the year 2001, I would say the total business of the company will generate between HK$5 billion and HK$6 billion,' Mr Pudwill said.

He also said after the acquisition Techtronic would transfer part of Ryobi's production to the mainland in a bid to cut manufacturing costs.

At present Ryobi has about 1,000 employees in North America.

Mr Chan said the acquisition was expected to be completed by the end of next month.

It was still subject to stock exchange approval and also that of company shareholders, Mr Chan said.

Meanwhile, he also revealed the company was in talks with Sunevision Holdings, the GEM-listed technology arm of the blue-chip Sun Hung Kai Properties, for possible business-to-business co-operation.



Techtronic gears up on Ryobi