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09 Jun 2020
$160 million all-cash acquisition set to create ‘world-leading’ provider of thin-film optical coatings.
Materion is set to expand and diversify its optical coatings business dramatically, with a $160 million agreement to acquire historic thin-films pioneer Optics Balzers.
The all-cash deal, which is subject to regulatory approvals but expected to be completed by September, is seen by Materion as highly complementary - from the point of view of geography, technology, and applications.
“Optics Balzers is a pioneer in thin-film optical coatings with a strong brand name and reputation for quality,” announced Materion. “The team has demonstrated an unmatched ability to develop proprietary technology and create value for global customers in attractive high-growth markets.”
Complementary fit
Expressing great admiration for Balzers - and admitting that he had been pursuing the company for some time - Materion CEO Jugal Vijayvargiya declared that the move would “create the world’s leading thin-film optical coatings provider”.
“We have long held a deep amount of respect and appreciation for the Optics Balzers business,” Vijayvargiya said: “Their technical capabilities, product portfolio, end market, and geographic mix, combined with their talented leadership team, make them the ideal partner to accelerate our global growth.”
Balzers CEO Detlev Häusler added: “Our combined global reach, technical capabilities, and in-house talent should create tremendous value for our customers and expand opportunities for our employees.
"We are assuming that all employees in all sites will be taken over, because the focus of the company’s acquisition is on growth rather than on cost reduction.
"The new owners are aware of the strong Optics Balzers brand value," the Balzers CEO added. "Thanks to the new shareholder, Optics Balzers will be able to implement the global expansion strategy more quickly, and better exploit opportunities.”
Founded in 1946, Liechtenstein-based Balzers has long been recognized for its coatings expertise, with particular strengths in the visible and near-infrared spectral regions. Applications in life sciences applications accounted for one third of the firm’s $67 million sales in the latest full year of trading.
Growth areas
In contrast, Materion’s main focus is further into the infrared, with its sales dominated by applications in the North American aerospace and defense market.
Materion has also provided beryllium for the primary mirror surface of the James Webb Space Telescope, while its products feature in night-vision and camera optics for cars, and infrared sensors in fighter jets and unmanned aerial vehicles.
“This is an excellent fit from a technology standpoint,” stated Vijayvargiya, adding that the deal would enable the US firm to penetrate the life sciences sector in a way that it had not been able to manage previously.
The CEO highlighted some key growth applications enabled by Balzers' technologies, including fluorescence microscopy, wafer-level optics for facial recognition technologies, and emerging requirements for anti-reflective coatings in automotive lidar systems for self-driving vehicles.
The complementary nature of the deal is evident in the geographical sales of the two firms. Only 7 per cent of Optics Balzers’ sales in the year to March were to US customers, with a fairly even split between Europe and Asia otherwise.
Sales from Materion’s own coatings division are dominated by North America, with the region accounting for more than three-quarters of revenues in fiscal year 2019.
Assuming that planned the deal gets the green light from regulators, Materion will benefit from Balzers’ state-of-the-art research and manufacturing facilities in Liechtenstein and Germany in Europe, as well as its new production site in Penang, Malaysia.
The US firm said that the entire Balzers management team, global workforce, and facilities will be merged within its “precision coatings” business segment.
That precision coatings unit posted sales of $18.7 million in Materion’s most recent financial quarter, a sharp year-on-year decline after the company decided to exit the large-area coatings sector.
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