Enters into Agreement to Acquire Cornell
Dubilier for Total Cash Consideration of $263 Million, Adding Film,
Electrolytic and Mica Capacitor Product Offerings; Expected to be
Accretive to Non-GAAP EPS in 2024
Announces Exploration of Strategic Alternatives
for Consumer MEMS Microphones Segment
Actions Reflect Execution of Strategic Roadmap
to Increase Exposure to High-Growth Medtech, Defense &
Aerospace, and Industrial Electrification End Markets
Knowles Corporation (NYSE: KN) (“Knowles” or the “Company”), a
leading global supplier of high performance components and
solutions, including ceramic capacitors and radio frequency (“RF”)
filters, advanced medtech microphones and balanced armature
speakers and audio solutions, today announced strategic actions to
accelerate its transformation to an industrial technology company
focused on higher growth and higher value opportunities.
The Company has entered into a definitive agreement to acquire
Cornell Dubilier (“CD”) in an all-cash transaction. In parallel,
Knowles announced that it is evaluating strategic alternatives for
its Consumer MEMS Microphones business (“CMM”).
Proposed Acquisition of Cornell Dubilier
Cornell Dubilier, based in Liberty, South Carolina, is a
technology leader and manufacturer of high-quality film,
electrolytic and mica capacitors used in demanding medtech,
military, aerospace, and industrial electrification applications
with an annualized revenue of more than $135 million and over 35
thousand customers. The acquisition:
- Increases Exposure to High-Growth End Markets: The
transaction significantly expands Knowles’ serviceable available
market through Cornell Dubilier’s capacitor offerings. In addition,
Cornell Dubilier’s end markets are aligned to key growth tailwinds,
including increasing defense budgets, medical imaging and critical
care application growth as well as industrial electrification and
implementation of next generation fast charging architectures.
- Diversifies and Expands Product Portfolio: The
combination of Cornell Dubilier’s broad selection of power film,
electrolytic and mica capacitors with Knowles’ Precision Devices
segment will deliver a compelling value proposition and wider
portfolio of products and solutions to both existing and new
customers.
- Drives Non-GAAP EPS Accretion and Preserves Financial
Flexibility: Pro forma, the acquisition is expected to be
accretive to Knowles’ non-GAAP EPS in 2024. Following the closing
of the acquisition, Knowles expects to have a leverage ratio of
1.4x pro forma EBITDA and maintain its capital deployment strategy
focused on balancing R&D and capex investment with accretive
M&A while continuing to return cash to shareholders through
share repurchases.
“Adding Cornell Dubilier’s impressive, broad-based roster of OEM
and distribution partner customers, as well as its leading
capabilities in capacitor technology will expand the applications
for Knowles’ products,” said Knowles Chief Executive Officer
Jeffrey Niew. “We will be well positioned to grow with new and
existing customers as we work to generate stronger earnings and
cash flow and create shareholder value. We admire the outstanding
company and culture built by the Kaplan family over the past 40
years and we look forward to welcoming Cornell Dubilier’s talented
employees to Knowles.”
“We are thrilled to be joining Knowles, which shares our culture
of innovation,” said Cornell Dubilier Chief Executive Officer Jim
Kaplan. “Like Knowles, some of the world’s most respected companies
rely on Cornell Dubilier’s technologies, and together, we will be
well positioned to offer even more cutting-edge products and
solutions to our customers and drive growth.”
Acquisition Terms & Details
The total cost of the acquisition is $263 million and consists
of a $140 million cash payment at closing and an interest-free
seller note of $123 million, with $50 million maturing one year
from closing and the remaining $73 million maturing two years from
closing. The total fair value of the consideration transferred is
estimated at $250 million and represents 9.6x Cornell Dubilier’s
trailing-twelve-month adjusted EBITDA inclusive of run-rate cost
synergies. Knowles expects to finance the acquisition with a
combination of cash on hand, borrowings from its existing revolving
credit facility, and the seller note.
The acquisition is expected to close in the fourth quarter of
calendar year 2023, subject to regulatory approvals and other
customary closing conditions.
J.P. Morgan is serving as the exclusive financial advisor to
Knowles and Foley & Lardner LLP is serving as its legal
advisor.
Exploring Strategic Alternatives for Consumer MEMS
Microphones Business
The Company also announced today that it is reviewing strategic
alternatives for its CMM business. CMM designs and manufactures
micro-electro-mechanical systems microphones that enable voice
control communication and superior audio recording for customers
across the ear, compute, internet of things and smartphone market
segments.
Mr. Niew commented, “The CMM segment is an attractive,
cash-producing business with differentiated products and a strong
customer base. This process is another step in Knowles’ business
transformation as we explore potential partners to accelerate a
return to growth for CMM.”
The Company has engaged Jefferies LLC to assist in the CMM
strategic review. No assurance can be given that any transaction or
other strategic outcomes will result from the review. The Company
has not set a timetable for the conclusion of the strategic review
and does not intend to comment on or provide updates regarding
these matters unless and until it determines that further
disclosure is appropriate or required.
Investor Presentation
Knowles today posted an investor presentation with details
regarding the Cornell Dubilier transaction, which is available at
http://investor.knowles.com.
Non-GAAP Financial Measures
Non-GAAP diluted earnings per share (“non-GAAP diluted EPS”) is
adjusted for certain non-GAAP reconciling adjustments, including
stock-based compensation expense, intangibles amortization expense,
impairment charges, restructuring charges, and other infrequent or
non-recurring expense and income items that, when removed, result
in greater comparability of results between reporting periods.
Non-GAAP diluted EPS also includes the income tax effects of
non-GAAP reconciling adjustments, which are calculated using the
applicable tax rates in the jurisdictions of the underlying
adjustments. The number of shares used in the non-GAAP diluted EPS
calculations excludes the impact of stock-based compensation
expense expected to be incurred in future periods and not yet
recognized in the financial statements, which would otherwise be
assumed to be used to repurchase shares under the GAAP treasury
stock method.
Knowles believes that non-GAAP measures are useful as
supplements to its GAAP results of operations to evaluate certain
aspects of its operations and financial performance, and its
management team primarily focuses on non-GAAP items in evaluating
Knowles' performance for business planning purposes. Knowles also
believes that these measures assist it with comparing its
performance between various reporting periods on a consistent
basis, as these measures remove from operating results the impact
of items that, in Knowles' opinion, do not reflect its core
operating performance. Knowles believes that its presentation of
non-GAAP financial measures is useful because it provides investors
and securities analysts with the same information that Knowles uses
internally for purposes of assessing its core operating
performance.
About Knowles
Knowles is a market leader and global provider of advanced
micro-acoustic microphones and balanced armature speakers, audio
solutions, and high performance capacitors and RF products, serving
the consumer electronics, medtech, defense, electric vehicle,
industrial, and communications markets. Knowles uses its leading
position in SiSonic™ micro-electro-mechanical systems ("MEMS")
microphones and strong capabilities in audio processing
technologies to optimize audio systems and improve the user
experience across consumer applications. Knowles is also a leader
in hearing health acoustics, high performance capacitors, and RF
solutions for a diverse set of markets. Knowles’ focus on the
customer, combined with unique technology, proprietary
manufacturing techniques, and global operational expertise, enables
it to deliver innovative solutions across multiple applications.
Founded in 1946 and headquartered in Itasca, Illinois, Knowles is a
global organization with employees in over a dozen countries. The
Company continues to invest in high value solutions to diversify
its revenue and increase exposure to high growth markets. For more
information, visit knowles.com.
About Cornell Dubilier
Cornell Dubilier is a privately held company headquartered in
Liberty, South Carolina. Cornell Dubilier is a technology leader
and manufacturer of high-performance film, electrolytic and mica
capacitors used in demanding medtech, defense & aerospace, and
industrial electrification applications.
Cautionary Note Regarding Forward-Looking Statements:
This press release contains certain statements, including those
statements relating to the Company’s expectations regarding the CD
acquisition, the evaluation of strategic alternatives for the CMM
business, plans and objectives of management for future operations
and other statements that do not directly relate to any historical
or current fact which are “forward-looking” statements within the
meaning of the safe harbor provisions of the Securities Act of
1933, as amended, the Securities Exchange Act of 1934, as amended,
and the Private Securities Litigation Reform Act of 1995. The words
“expect,” “estimate,” “budget,” “continue,” “intend,” “will,” and
similar expressions, among others, generally identify
forward-looking statements, which speak only as of the date the
statements were made. The matters discussed in these
forward-looking statements are based on current plans,
expectations, forecasts and assumptions and are subject to risks,
uncertainties and other factors that could cause actual outcomes or
results to differ materially from those projected, anticipated or
implied in these forward-looking statements. Where, in any
forward-looking statement, an expectation or belief as to future
results or events is expressed, such expectation or belief is based
on the current plans and expectations of management and expressed
in good faith and believed to have a reasonable basis, but there
can be no assurance that the expectation or belief will be achieved
or accomplished. Many factors that could cause actual results or
events to differ materially from those anticipated include those
matters described under the sections entitled “Risk Factors” and
“Management’s Discussion and Analysis of Financial Condition and
Results of Operations” of the Company’s Annual Report on Form 10-K
for the fiscal year ended December 31, 2022, subsequent Reports on
Forms 10-Q and 8-K and our other filings we make with the SEC, as
well as the occurrence of any event, change or other circumstances
that could give rise to the termination of the definitive agreement
to acquire CD; the possibility that various closing conditions for
the acquisition may not be satisfied or waived; the possibility of
a failure to obtain, delays in obtaining or adverse conditions
contained in regulatory or other required approvals; the failure of
the acquisition to close for any other reason; the amount of fees
and expenses related to the acquisition or the strategic
alternatives process; the ability to achieve projected financial
results; the risk that the anticipated benefits and synergies from
the acquisition may not be fully realized or may take longer to
realize than expected; the effects of disruption from the
acquisition or strategic alternatives process making it more
difficult for Knowles or CD to maintain relationships with
employees (including potential difficulties in employee retention),
collaboration parties, other business partners or governmental
entities; other business effects, including the effects of
industrial, economic or political conditions outside of Knowles’
control; the timing of the strategic alternatives review; the
outcome of the strategic alternatives review, including whether any
transaction occurs at all; whether any such strategic alternative
will result in additional value for Knowles and its shareholders;
and changes in economic, competitive, strategic, technological,
regulatory or other factors that affect the operation of Knowles’
businesses. Any forward-looking statement speaks of as of the date
on which it is made and the Company does not assume any obligation
to update or revise any forward-looking statements whether as a
result of new information, future events, or otherwise, except as
required by applicable law. The Company does not undertake any
obligation to update any forward-looking statements as a result of
new information, future developments or otherwise, except as
expressly required by law.
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version on businesswire.com: https://www.businesswire.com/news/home/20230918922458/en/
Financial Contact: Patton Hofer Knowles Investor
Relations Email: investorrelations@knowles.com
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