ADC (www.adc.com) reached an agreement to acquire the Krone Group (www.krone.com) from GenTek Inc. (www.gentek-global.com). In a statement announcing the agreement, and in a conference call on March 25, the day the deal was announced, ADC listed market share in enterprise structured cabling systems as one of six key points of the acquisition. The other five include central-office infrastructure technology; a diversified global customer base; accelerated entry into growth markets such as China, India, Russia, Eastern Europe, and Southeast Asia; opportunities to cross-sell and upsell a broader product portfolio; and cost leadership through global manufacturing, engineering, and supply-chain management.
During the conference call, ADC president and CEO Robert Switz described his company as "a small participant today" in the enterprise structured cabling business, emphasizing that the acquisition puts the company in the heart of this industry. "Now we have a full range of participation," he added. He cited a lack of adequate channels for its products as the reason ADC had not previously penetrated this market more deeply.
The deal is valued at approximately $350 million, and ADC said that Krone's sales in 2003 totaled $316 million. ADC expects to close the deal by July 31. Switz commented that Krone and ADC are roughly the same size in revenue and head count.
He also pointed to global market position as a benefit. Approximately 70% of ADC's revenue comes from North America, while approximately 80% of Krone's revenue comes from outside North America. Switz said there is little overlap in customers outside the U.S. Domestically there is some minor customer overlap, but for different products.
"This is an ideal acquisition and a perfect fit with ADC's new strategic initiative to become the leader in global network infrastructure solutions and services," Switz said. "This is the first major step we are taking to fulfill the growth plans we outlined over the last several months. With the addition of Krone, we further establish ADC as a leader in network infrastructure, a core strength area where we have a proven record of success. Ultimately, our customers benefit from this combination."