Belden selling some cable assets to Superior Essex; may close Phoenix plant
St. Louis, MO—Belden Inc. has agreed to sell parts of its communication cable business to Superior Essex Inc. for as much as $95 million, and may close its Phoenix-based facility.
St. Louis, MO— Belden Inc. has agreed to sell parts of its communication cable business to Superior Essex Inc. for as much as $95 million, and may close its Phoenix-based facility. Superior Essex will buy selected inventories, machinery and equipment, and will assume certain customer contracts related to Belden's North American telecommunication wire and cable business. This North American segment had revenues of $202.4 million in 2003 and a pretax operating loss of $109.4 million, including an impairment charge of $92.4 million and income of $3.0 million under a minimum requirements contract.
The total purchase price is subject to adjustment based on inventory levels at the closing, though but it will not exceed $95 million, including a $10 million contingency payment based on successful transition of the business under certain customer contracts. Belden and Essex’s agreement also is subject to certain closing conditions, including approval under U.S antitrust laws.
As a result of the sale, Belden is contemplating closing its manufacturing operation in Phoenix, AZ. This possible move is subject to discussions with the plant’s employee bargaining unit.
'Given the lower level of demand that has characterized the telecommunications market in the U.S. for the past two years, we have been unable to maintain profitability in the North American communications business, despite aggressive cost reductions and the best efforts of our people,” says C. Baker Cunningham, Belden’s chairman, president and CEO. “We’re confident that we will be able to smoothly transition the business to Superior Essex without interruption for our customers.
“Going forward, we will focus on the electronics and data networking markets, where we are able to add value through differentiating our product offering and further developing our customer and distributor relationships, and on the execution of our planned merger with Cable Design Technologies Corp.' Belden announced Feb. 5 that it’s planning to join with Cable Design Technologies Corp. in a merger of equals. The two firms expect to complete this merger during the second quarter of 2004 (2Q04).
Belden adds that it will account for the sale of its North American communications cable business as a discontinued operation. The company expects that its earnings from continuing operations for the first quarter ending March 31, 2004 will be about $0.05 per share. Belden does not expect a material gain or loss on the sale of the assets, but expects to continue to incur operating losses, severance charges, and other closure costs with respect to this business until the divestiture is completed.
Belden projects that, if it closes the Phoenix operation as contemplated, then liquidating retained working capital, real estate and other remaining assets will approximately offset the cash costs of winding down the business.
Control Engineering Daily News Desk
Jim Montague, news editor