FOR IMMEDIATE RELEASE
FISHER & PAYKEL APPLIANCES ACQUIRES
DYNAMIC COOKING SYSTEMS
October 11, 2004
HUNTINGTON BEACH, CA, – Fisher & Paykel
Appliances Holdings Limited (“FPA”) today
announces the acquisition of Dynamic Cooking Systems,
Inc. (“DCS”), a leading US manufacturer
and distributor of premium cooking appliances.
John Bongard, Managing Director and CEO, Fisher & Paykel
Appliances Holdings Limited said, “DCS is considered
one of the leading brands of high-end indoor and outdoor
cooking appliances in the United States. The DCS products
are an excellent fit with our own dedicated US range
of laundry and kitchen products, and will provide us
with a comprehensive suite of premium appliances for
the US market.”
“Fisher & Paykel Appliances has, for some
time, been focused on growing its sales in key international
markets, in particular the United States which is the
largest appliances market in the world,” said John. “The
acquisition of DCS will allow us to build on our existing
US sales and distribution infrastructure with a completely
new cooking range which is complementary to our existing
range of premium products. Furthermore, the acquisition
will establish a manufacturing base in the United States
for us. Over time, there is the potential to expand the
DCS facilities to manufacture other products for the
US. This acquisition clearly demonstrates our long-term
commitment to the US market, and we expect this will
increase Fisher & Paykel’s profile and brand
value in this core market”.
DCS has been acquired from a private equity investor
and the original founders of the business. In addition
to the purchase price of US$33 million (NZ$49.3 million)
FPA anticipates investing a further US$9.7 million (NZ$14.5
million) in new manufacturing plant and equipment and
US$12 million (NZ$17.9 million) in working capital for
DCS through to December 2005. DCS is being acquired on
a debt free basis.
Dynamic Cooking Systems Inc. commenced operations in
1987 manufacturing cooking appliances under an Original
Equipment Manufacturing (OEM) arrangement, initially
for Thermador. In 1991, DCS began manufacturing ultra
premium outdoor cooking appliances, primarily outdoor
grills (barbeques), where it retains a leading market
position in the United States. The company expanded into
high-end, commercial style indoor ranges, cooktops and
ovens through the 1990s. DCS now manufactures OEM products
for General Electric and Maytag, two of the largest appliances
companies in the world.
DCS products are now widely regarded to be among the
best performing professional cooking equipment in the
US market place. The company has a strong reputation
for product innovation and evolution of the high-end
cooking market and has recently won two prestigious Kitchen
and Bath Innovator Awards.
DCS products are manufactured at its factory in Huntington
Beach, Los Angeles, which was purpose built for the company
in 1998. The factory is located close to FPA’s
main US sales and distribution facilities in Irvine,
California.
DCS products are sold, directly or via distributors,
to approximately 1,200 retail dealers in the United States.
Many of these dealers also stock the Fisher & Paykel
range of kitchen and laundry products.
The company has achieved strong sales growth since establishment.
For the year to 31 December 2003, DCS achieved sales
of US$102.9 million (NZ$153.6 million) and for the eight
months to 31 August 2004 sales were US$75.8 million (NZ$113.1
million). This sales growth has been achieved despite
a lack of investment in new manufacturing equipment and
processes, minimal marketing spend and management changes
over recent years, all of which have impacted earnings.
This led to a restructuring of the business that gave
rise to the opportunity for FPA to make this acquisition.
John Bongard said that DCS was an ideal strategic opportunity
for FPA. The acquisition is in the core appliances sector
and in a market that FPA is very familiar with through
its existing US business. “DCS will provide us
with a new strategic platform to significantly expand
and enhance the Company’s product range and sales
profile in the United States”.
Since 1999, FPA has steadily grown its product range
and sales in the US with unit volume growth of more than
44 per cent per annum over that period. For the year
to 31 March 2004, FPA’s US dollar sales were US$85
million (NZ$140 million) which comprised approximately
16% of FPA’s total Appliances sales. The US product
range now includes DishDrawer Dishwashers, Smart Drive
clothes washers, the Titan cooking products (wall ovens
and gas and electric cooktops), Active Smart refrigerators
and SmartLoad Clothes Dryers.
For the six months to 30 September 2004, FPA continued
to achieve record sales in the US with volumes at 97,600
units, an increase of 35.5 per cent over the corresponding
six months in 2003. Dollar sales for this period were
US$54.3 million (NZ$84.8 million), an increase of 36.4
per cent. As a result of changes in distribution and
initial costs associated with integrating DCS with FPA’s
operations in the US, it is expected that FPA’s
net profit after tax for the year to 31 March 2005 will
be reduced by approximately US$1.3 million (NZ$1.9 million).
However, the acquisition is expected to contribute US$3.3
million (NZ$4.9 million) to net profit before taxation
in the calendar year to 31 December 2005. This corresponds
to an EBIT of US$7.7 million (NZ$11.5 million).
“Importantly, the acquisition meets all of our
threshold criteria. Its long-term strategic value to
FPA is considered significant,” John Bongard said.
FPA will immediately relocate key people experienced
in manufacturing and operations to lead the integration
of the businesses. The Company expects to achieve synergies
from acquiring DCS through streamlining distribution
arrangements, improving manufacturing equipment and processes
and implementing new marketing initiatives. In addition,
the acquisition will almost double FPA’s sales
revenue in the US, making it the company’s second
largest market after Australia. “This will provide
additional geographical diversification for us, balancing
our exposure to the Australian and New Zealand markets”,
said John Bongard.
Funding for the acquisition will be sourced
from FPA’s debt facilities
The total acquisition price and cost of new investment
is expected to amount to NZ$83.3 million, taking FPA’s
net debt to approximately NZ$145 million thereby increasing
gearing to approximately 22 per cent. The Directors believe
that the DCS acquisition is an excellent investment and
will provide better returns to shareholders, in the medium
term, than the previously announced on market share buy-back.
For this reason the Directors have decided not to proceed
with the share buy-back of up to NZ$85 million.
The Company has completed detailed due diligence on
DCS. UBS advised FPA in connection with the acquisition
and KPMG and Munger, Tolles & Olsen LLP provided
accounting and tax advice and US legal advice, respectively.
Further details on Fisher & Paykel Appliances and
DCS Appliances are available on their Web sites:
www.fisherpaykel.com
www.dcsappliances.com
Press contact:
Scott Davies
949-790-8900
scott.davies@fisherpaykel.com
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