AUSTIN, Texas - Flex (NASDAQ: NASDAQ:FLEX), a global manufacturing powerhouse, has announced its plans to acquire Crown Technical Systems for $325 million in cash. The transaction, expected to close by December 2024, is set to enhance Flex's capabilities in power distribution and protection systems and expand its presence in the utility power market.
Crown Technical Systems, known for its power distribution and control solutions, will complement Flex's existing data center power portfolio. This acquisition aligns with Flex's strategy to address power, heat, and scale challenges in data centers and is anticipated to be accretive in the first fiscal year post-closure.
Revathi Advaithi, CEO of Flex, emphasized that the deal would strengthen the company's ability to support its customers and contribute to long-term shareholder value through its EMS + Products + Services strategy. Norm Siddiqui, President of Crown Technical Systems, expressed confidence that joining forces with Flex will accelerate growth and benefit Crown's employees and customers.
The acquisition is expected to bolster Flex's exposure to high-growth markets, such as modular data centers and medium voltage power distribution. It is also anticipated to reinforce Flex's critical power portfolio and support its expansion in the U.S. data center market.
Crown Technical Systems is projected to generate revenue of approximately $120 million with a high-teens EBITDA margin in fiscal 2025, ending March 31, 2025. The closing of the acquisition is subject to customary conditions, including regulatory approval.
Flex will provide further details on the acquisition during its earnings call scheduled for Wednesday, October 30, 2024. The information in this article is based on a press release statement.
In other recent news, Flex Ltd. has reported strong Q1 earnings for fiscal year 2025, with net sales of $6.3 billion and a GAAP operating income of $233 million. The company also announced strategic acquisitions of FreeFlow and Ojjo to enhance product lifecycle services and promote sustainability. Analysts at Goldman Sachs (NYSE:GS) maintained their Buy rating on Flex Ltd., while Craig-Hallum upgraded the company's stock from Hold to Buy. JPMorgan (NYSE:JPM) revised its outlook, reducing the price target to $39.00 due to challenges in the automotive and industrial sectors.
In addition, Flex Ltd. has partnered with JetCool to develop server solutions for AI servers and high-density computing, focusing on rack-level solutions. The company disclosed the approval of significant supplemental equity awards for two of its top executives, aimed at promoting long-term retention and incentivizing superior shareholder returns. Flex Ltd.'s shareholders approved a share repurchase plan with a maximum expenditure of $1.7 billion. These recent developments highlight the strategic moves and financial performance of Flex Ltd.
InvestingPro Insights
Flex's acquisition of Crown Technical Systems aligns well with its current financial position and market performance. According to InvestingPro data, Flex boasts a market capitalization of $13.63 billion and a P/E ratio of 15.27, indicating a relatively attractive valuation considering its growth prospects.
InvestingPro Tips highlight that Flex has been aggressively buying back shares, which suggests management's confidence in the company's future. This strategy, combined with the acquisition, demonstrates Flex's commitment to enhancing shareholder value. Additionally, Flex is trading at a low P/E ratio relative to its near-term earnings growth, which could make it an appealing investment opportunity in light of this expansion.
The acquisition is expected to be accretive in the first fiscal year, which aligns with another InvestingPro Tip indicating that Flex's valuation implies a strong free cash flow yield. This financial strength positions the company well to integrate Crown Technical Systems and potentially accelerate growth in the data center and utility power markets.
Investors seeking more comprehensive analysis can access 12 additional InvestingPro Tips for Flex, providing a deeper understanding of the company's financial health and market position.
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