Dover Buys Sound Solution Biz. - Analyst Blog

Dover Corp. (DOV) has signed a definitive agreement to acquire Vienna, Austria-based Sound Solutions business line of NXP Semiconductors NV (NXPI) for $855 million. The acquisition is expected to close around the end of the first quarter of 2011 and will be slightly accretive to Dover's earnings per share during the first full year of ownership.

Sound Solutions is one of the world's leading manufacturers of dynamic speakers and receivers for cell phones and other consumer electronics. It has manufacturing facilities in Vienna and Beijing. Annual revenue for Sound Solutions is anticipated to be approximately $330 million in 2010.

Sound Solutions will become a part of Knowles Electronics within Dover's Electronic Technologies segment. Electronic Technologies manufactures advanced micro-component products for the hearing aid and consumer electronics industries, high frequency capacitors, microwave electro-magnetic switches, radio frequency and microwave filters, electromagnetic products, and frequency control/select components. The segment generated revenues of $1 billion in 2009 and $1 billion in the first nine months of 2010.

Dover foresees strong growth in the global cell phone market as cell phones become more and more indispensable for consumers. Further, the sound quality is a very important factor in the current mobile phone market. This acquisition will allow Dover to leverage that trend by broadening its product portfolio. With the addition of Sound Solutions, Knowles Electronics will now be the leading audio input and output supplier in the mobile handset industry.

Dover reported third-quarter 2010 adjusted EPS of 98 cents, beating the Zacks Consensus Estimate of 90 cents. Results recorded a 69% climb over the prior-year quarter's EPS of 58 cents driven by solid performance across all of its segments.

Dover expects revenue to grow in the range of 20%-21%, fueled by an organic revenue growth of 16.5%-17.5% and growth of 3.5% from acquisitions. Management also projects EPS in the range of $3.50 - $3.55, which however includes the third quarter tax benefit of 20 cents. Excluding this benefit, the guidance range stands at $3.30-$3.35.

Solid performance and bookings across all segments coupled with the ability to generate strong cash flow, continued focus on margin improvement and shareholder value position Dover for better results in the upcoming quarters. Further, it continues to pursue strategic acquisitions to improve its product offering and complement its organic growth strategy. We currently have a Zacks #2 Rank (short-term Buy recommendation) on the stock.

New York-based Dover is an industrial conglomerate producing a wide range of specialized industrial products and manufacturing equipment. Dover caters to a diverse clientele primarily spread over the Americas, Europe, and Asia. The company classified its business into four segments – Industrial Products, Engineered Systems, Fluid Management, and Electronic Technologies. Dover competes with the likes of Cooper Industries plc (CBE), Ingersoll-Rand Plc (IR) and Weatherford International Ltd. (WFT).

 
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