Hexatronic Group AB of Sweden, a manufacturer of fibre optic products, is acquiring Blue Diamond Industries LLC, the second-largest high density polyethylene conduit company in the United States.
Gothenburg-based Hexatronic will buy BDI for an enterprise value of $24.5m (€21m) with an additional purchase consideration of $2.5m (€2.1m) based on performance.
The sellers are four members of BDI's senior management team and they will continue in their current positions, according to Hexatronic.
BDI will not change its name after the deal closes in January and will continue operating with its headquarters in Lexington, Kentucky, and a recently renovated manufacturing facility in Middlesboro, Kentucky.
BDI CEO Sherri Simpson said Hexatronic gives Blue Diamond a boost into the growing microduct and fibre-to-the-home (FTTH) markets in the United States. Microducts are used as single ducts or bundled together with a protective oversheath in fibre networks.
"Microducts are a cost-effective, scalable method for deploying fibre to meet the increasing demand for bandwidth," Simpson said in an email to Plastics News. "Microfiber cable and duct technology was born in Europe and they are the experts and innovators in this technology."
Sweden has a mandate to provide 98% of the population with a 1Gbit connection by 2025, Simpson also said.
"The US is just starting to use this technology for FTTH-1G to the home and 5G wireless mobile rollout," she added.
For the acquirer, the deal creates Hexatronic USA, a Lexington-based business with infrastructure solutions from the head end to users of the cloud, broadband, Wi-Fi, mobile and 5G data technology.
Simpson said Hexatronic USA is a separate company with different products but will share its headquarters with BDI and invest in its nearby manufacturing plant.
"Hexatronic will invest in extrusion lines for microduct and regular conduit lines in 2018," Simpson said.
Hexatronic, which is considered a trailblazer in microduct and fibre infrastructure, reports annual sales of about $175m (€149m) while BDI's yearly sales, which are mostly for larger conduit up to 6 inches in diameter, were about $28m (€24m) in 2017.
Acquisitions are a key component of Hexatronic's strategy for long-term growth and profitability, President and CEO Henrik Larsson Lyon said in 15 Nov comments about quarterly results from July through September 2017.
"We are also convinced that we have to be local in the markets in which we want to grow. For example, we need to have a local organisation for sales, distribution and potentially in-house production," Lyon said. "During the quarter, we made an organisational change that increases the focus on acquisitions."
BDI was attractive because it had relocated production to a renovated 75,000-square foot manufacturing facility in Middlesboro in April 2016 after the roof of the original site in Lexington collapsed during a 2015 snow storm.
The BDI plant has 90 employees and 11 extrusion lines. In addition to HDPE conduit for communication and power, it makes products for wind and solar energy, highway and street lighting, transportation systems and industrial pressure pipe.
"Hexatronic gives us the ability to increase our product offering and continue to make capital investments to meet the growing needs of our customers," Simpson said in a news release. "Their unique knowledge of microduct and fiber will accelerate our product development and ability to offer a full line of products, including microduct systems."
Hexatronic officials are pleased that their US market is "developing well."
"It is encouraging that we have reached an important milestone in the US," Lyon said. "Our system offering, Matrix, has now been approved by a major American operator. We do not think this will have a major impact on sales in the next few quarters, but we see strong potential in the long term."
The fibre-access Matrix system includes products for aerial, ground, underwater and indoor installation and was designed to provide the lowest total cost of ownership, highest capacity and best possible scalability and flexibility.
Hexatronic Group AB has 400 employees and sales offices or subsidiaries in Sweden, Norway, Finland, United Kingdom, China, New Zealand and the United States. The group is listed on Nasdaq Stockholm under the ticker HTRO.