Global Technovations Completes Purchase Of Onkyo America, Inc.
1 September 2000
Global Technovations Completes Purchase Of Onkyo America, Inc.
PALM BEACH GARDENS, Fla.--Aug. 31, 2000--Acquisition Of Automotive Technology Company Is First Step In Strategic Expansion For GTI
Global Technovations, Inc. ("GTI" or the "Company") (AMEX:GTN) today announced that it had completed the purchase of 100% of the stock of Onkyo America, Inc. ("OAI"), the undisclosed automotive technology company GTI agreed to acquire in June 2000. Based in Columbus, Indiana, OAI is one of the largest manufacturers of automotive speakers in North America, and an OEM supplier to many of the major automotive companies including General Motors and Daimler-Chrysler. Additionally, OAI produces and sells speakers for cell phones, computers, and televisions for leading companies. OAI posted $84 million in pro-forma 1999 revenue and $7.3 million in earnings before depreciation, amortization, interest and taxes ("EBITDA").
The $25 million purchase price was comprised of $13,000,000 in cash and $12,000,000 in Notes ("Notes") payable to the sellers due in August 2003. The interest rate on the Notes is 7.5%, simple interest, calculated on the principal only, due and payable in one lump sum in August 2003. Consideration for the transaction also includes an earnout of up to $15,000,000 contingent upon OAI achieving certain annual performance `post transaction' milestones during the next five years. The earnout, if any, would be paid to one of the sellers at the end of the fifth year after the acquisition date. (The sellers consist of Onkyo Corporation and two of its foreign subsidiaries.)
In connection with this transaction, the Company refinanced existing OAI bank debt and a portion of the acquisition with a $31,230,000 Credit Facility from GMAC Business Credit, LLC. Approximately $20,500,000 of the facility was drawn down at closing. Additionally, as previously disclosed, a trust of which Mr. G. Jeff Mennen, one of the Company's outside directors, is co-trustee, supplied $12,000,000 in financing.
OAI and its award winning manufacturing facility have a superb reputation for technological innovation, high quality, and a motivated and talented workforce led by a first class management team. Will C. Willis, GTI's Chairman, President and Chief Executive Officer, noted, "This transaction strategically transforms our Company into a substantial technology company." He then explained the Company's re-entry into the automotive speaker business by saying, "In September 1999, we sold substantially all of the assets of our automotive subsidiary, Top Source Automotive, Inc. ("TSA"), to OAI. At that time, we exited the automotive speaker business because TSA, while generating cash, was a small, single product, one customer operation trying to compete in a consolidating industry. TSA's future as a stand-alone automotive industry supply company was limited and the cash generated by the sale was needed to fund the expansion of our MotorCheck(TM) On-Site Analyzer business ("OSA-II"). OAI, by contrast, is one of the top two automotive speaker producers in North America, and is developing speaker sales into other vertical markets by adapting its proprietary technology for new applications."
Mr. Willis further stated, "The OAI transaction is clearly a strategic rather than synergistic acquisition for GTI. It provides us with a significant business platform from which to build our Automotive and Diagnostic Technology Strategic Business Units ("SBUs"). Further, it provides our shareholders with an investment in a large, stable and growing audio business, along with a high potential emerging diagnostic technology. To use the vernacular of investment bankers, GTI now can no longer be characterized, by the financial community, as a one-product, `venture' type Company. The acquisition of OAI provides GTI with significant credibility and enables us to continue realizing the potential of the OSA-II technology while building on the stability of the audio business."
Mr. Willis went on to say, "The opportunity at hand to leverage TSA's creativity and audio design engineering, with OAI's audio technology and production capabilities, significantly changes the complexion of GTI's interest, and future involvement, in the audio technology market. This acquisition strengthens GTI's underlining shareholder value and gives us the size, stature and financial credibility needed to conduct OSA-II business with large players in our target markets. The acquisition also enhances shareholder security by limiting downside risk, while providing greater upside potential. It will also allow us to utilize our $30 million NOL."
Mr. Willis continued, "We welcome Onkyo America's entire workforce to our organization. With the OAI management team remaining together, both of our SBUs will be able to maintain their focus and commitment to their respective industry applications."
Mr. Shinobu Shimojima, President of OAI, stated, "We are very excited about this acquisition because it will afford us with opportunities to expand our business, while further building on our relationships with Japanese and other Asian companies. We look forward to working with GTI's American management team to maintain and enhance our customer service and support."
David Natan, Vice President and CFO of GTI, pointed out, "The purchase price and deal structure made it a `must do' acquisition for GTI. The cash outlay for the transaction is less than 3.5 times unaudited 1999 pro-forma EBITDA. Additionally, we were able to minimize shareholder dilution as this transaction was accomplished without the issuance of a single share of our stock. Also, in the same transaction, we were able to raise funds for OSA-II. The warrants that were issued represent less than 5% current dilution, are unregistered, and are in friendly hands. Based on current OAI's operations and pro-forma projections (both unaudited), the transaction is accretive."
The Company will conduct an investor conference call at 4:30 P.M. (east coast time) on Tuesday, September 5, 2000 to discuss the acquisition and the status of specific business initiatives. Interested parties may either register for the call, by contacting Maggie DeLutri at (561) 775-5756, or the Equity Group at (212) 836-9609, or they may listen to the conference call live over the Internet at www.vcall.com. Also, a replay of the conference call will be available for 90 days. To listen to the live call, please go to this web site at least 15 minutes earlier to register, download and install any necessary audio software.