Technitrol to Acquire Sonion

PHILADELPHIA /BUSINESS WIRE/ -- Technitrol Inc., announced it has agreed to acquire the capital stock of Sonion A/S, a world-leading producer of highly innovative microacoustic transducers and micromechanical components for manufacturers of hearing instruments, advanced acoustic devices, medical devices, and mobile communication devices. These products are used in hearing aids, high-end earphones, medical devices, wireless handsets, and other mobile terminal equipment. Sonion is also a leader in microelectromechanical systems (MEMS) microphone technology.

The purchase price is approximately $385 million in cash, based on current exchange rates. The acquisition will be financed through a new credit facility and cash on hand. Closing of the transaction is expected before the end of February 2008.

Sonion is based in Roskilde, Denmark, and also has facilities in Poland, China, Vietnam, and the Netherlands. It employs about 4900 people, including more than 140 research and development personnel. Revenues in 2007 were approximately $180 million. Technitrol intends to keep Sonion's current management and professional personnel largely in place.

Technitrol expects that this acquisition will be EBITDA-positive from the outset but will dilute earnings per share for part of the first year, due in significant part to the interest expense on acquisition-related debt, which is largely nontax deductible in the several quarters after the closing, and the noncash amortization of certain acquisition-related intangibles. Thereafter, Technitrol expects that Sonion will be accretive to earnings in the subsequent year by approximately $0.25 per share.

Sonion's hearing-instrument components business (approximately 68% of 2007 revenues) consists of subminiature high-performance transducers and plastic electromechanical switches, volume controls, and other modules. Included in these products are a variety of components for increasingly popular "receiver-in-canal" hearing aids. Hearing instrument components will become a separate product division of Technitrol's Electronic Components business. Sonion's mobile terminal components business (32% of revenues), which produces wireless handset receivers, speakers, and microphones, will be integrated into an existing division, which includes antennas and other radio frequency components and modules.

"Sonion's businesses fit seamlessly into our Electronic Components group," said Technitrol Chairman and Chief Executive Officer James M. Papada, III. "They serve rapidly growing markets with engineering-intensive, mission-critical products. They thrive on close, collaborative design relationships with customers, and they require expertise in high-volume, quality production operations. With more than 500 active technology patents, the Sonion team has done a superior job of leading microacoustic component technology across all of its product lines. Sonion is an innovation powerhouse. Technitrol is thrilled to deliver this terrific opportunity to our shareholders as we continue our drive to further acquire innovative product lines in high-growth adjacent market spaces in which we can utilize our core competencies."

Growth drivers for Sonion's hearing aid, acoustical, and medical products include an aging population; increasingly sophisticated, effective, and inconspicuous hearing instruments; increasing use of hearing aids in both ears; the popularity of very small hearing instruments worn within the ear canal; and increasing penetration of high-end earphones and medical devices in emerging markets. "Sonion has played a leading role in the evolution of subminiature transducers (e.g., receivers, microphones, and telecoils) and control modules. Its market share currently stands at about one-third for transducers and more than one-half for subminiature electromechanical parts," Papada said. Analysts expect revenues in this recession-hedged business to grow at more than 10% annually.

Comparable revenue growth is assumed for mobile device components. "As with our current wireless components, growth will be driven by sales of terminal devices, such as handsets, laptops, and PDAs, as well as increasing device sophistication, which drives the need for more and better functionality per device," Papada said. Currently, Sonion is one of several major suppliers of receivers, speakers, and microphones to the mobile device market.

Sonion was also an early entrant into the disruptive technology called microelectromechanical systems (MEMS), an area in which it has developed technological leadership. MEMS microphones are much smaller and much more durable than conventional handset microphones. Also, their potential applications extend well beyond mobile phones, to hearing aids as well as critical sensors for automotive, industrial, and medical uses. The technology is catching on quickly. Analysts estimate near-term market growth for MEMS components to be between 40% and 80% per year. Sonion has volume MEMS production capabilities, including two cleanroom facilities, and has patented critical technology related to the manufacture of MEMS microphones.

"Technitrol will play a strong role in helping Sonion expand its market presence and develop fully into a truly lean global manufacturer and supplier," Papada said. "As part of our electronic components team, Sonion can leverage a well-established global sales network, an advanced supply chain management system, and the benefits of decades of continuous manufacturing improvement activity. Sonion gives Technitrol a low-cost manufacturing presence in Vietnam, but at a relatively early development stage, so that financial benefits of this manufacturing strategy are still to be realized. In addition, we believe that we can achieve efficiencies and improvements in our own existing operations as well as Sonion's, as we integrate various SG&A functions globally."

Morgan Stanley is acting as financial advisor to Technitrol in the Sonion transaction.

Separately, Technitrol announced that on January 8, 2008, it entered into an agreement with JPMorgan Chase Bank, N.A. and J.P. Morgan Securities Inc. to arrange and syndicate a $200 million senior term loan facility and a $300 million senior revolving credit facility. Proceeds from the facilities will be used for the Sonion acquisition and for other corporate purposes. The credit facilities are expected to close on or before February 28, 2008, subject to customary closing conditions.

Based in Philadelphia, Technitrol is a worldwide producer of electronic components, electrical contacts and assemblies, and other precision-engineered parts and materials for manufacturers in the data networking, broadband/Internet access, consumer electronics, telecommunications, military/aerospace, automotive, and electrical equipment industries.

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