Knowles Corporation is aggressively transforming into an industrial technology powerhouse. The components supplier announced it will acquire capacitor manufacturer Cornell Dubilier in a $263 million all-cash deal. This strategic purchase provides Knowles with expanded exposure to highly attractive end markets including medtech, defense, and industrial electrification.
Privately-held Cornell Dubilier, based in South Carolina, is a leader in film, electrolytic and mica capacitors used in demanding applications. Its capacitors are found in sectors like aerospace, automation, and critical care medical devices. The company generates over $135 million in revenue annually.
The acquisition brings new state-of-the-art capacitor technology into Knowles’ portfolio. This allows Knowles to offer more innovative solutions and cross-selling opportunities to customers. Cornell Dubilier’s offerings create a compelling combined value proposition for Knowles in the industrials space.
Knowles CEO Jeffrey Niew stated the purchase will help Knowles “grow with new and existing customers as we work to generate stronger earnings and cash flow and create shareholder value.” The deal is expected to contribute positively to Knowles’ earnings per share (EPS) beginning in 2024.
Specifically, the acquisition provides three key benefits:
Expands Knowles’ addressable market – Cornell Dubilier significantly expands Knowles’ serviceable available market through its broad capacitor capabilities and presence in diverse sectors including medtech, defense, aerospace, and industrial automation.
Diversifies product portfolio – Combined with Knowles’ existing precision devices like RF filters and ceramic capacitors, the deal delivers a wider range of capacitor products and solutions including film, electrolytic, and mica capacitors.
Boosts profitability – Knowles expects the acquisition to be accretive to earnings per share starting in 2024. The purchase is forecast to contribute to the bottom line while Knowles maintains balance sheet flexibility through its capital deployment strategy.
For investors, the strategic deal offers exposure to higher growth markets as Knowles pivots towards attractive areas with strong tailwinds. The companies noted defense spending increases, healthcare application growth, and industrial automation advances are driving demand.
The announced $263 million price consists of $140 million upfront and $123 million in seller notes due over the next two years. Knowles expects to finance the deal through cash, existing credit, and the deferred paper. The total fair value transferred is estimated at 9.6x Cornell Dubilier’s trailing EBITDA including synergies.
The acquisition caps off a transformative year for Knowles as it shifts towards high value industrial technology. Knowles recently restructured divisions to optimize its focus areas. It is also reviewing strategic options for its consumer microphones segment.
Together, these moves aim to reshape Knowles into a higher growth, higher margin technology supplier. The company is working to leverage megatrends like IoT, EVs, and 5G adoption. Knowles is strengthening its industrial roots to drive value for shareholders.
The Cornell Dubilier deal provides Knowles with an expanded presence in crucial growth industries. It also refocuses the company towards participating in rising opportunities like defense, medtech, and automation. For investors, the transformative purchase plants Knowles firmly in key sectors, unlocking value over the long-term.