Fisher & Paykel Acquires Dynamic Cooking Systems
Oct 15, 2004
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&Fisher & Paykel Appliances Holdings Limited announced that is has acquired Dynamic Cooking Systems, Inc. (DCS), a leading U.S. manufacturer and distributor of premium cooking appliances.

"DCS is considered one of the leading brands of high-end indoor and outdoor cooking appliances in the United States," John Bongard, managing director and CEO, Fisher & Paykel Appliances, said in a statement. "The DCS products are an excellent fit with our own dedicated U.S. range of laundry and kitchen products and will provide us with a comprehensive suite of premium appliances for the U.S. market."

Mr. Bongard also said Fisher Paykel Appliances has always been focused on growing its sales in key international markets, in particular the United States.

"The acquisition of DCS will allow us to build on our existing U.S. sales and distribution infrastructure with a completely new cooking range, which is complementary to our existing range of premium product," he said. "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 U.S. This acquisition clearly demonstrates our long-term commitment to the U.S. 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 U.S. $33 million, Fisher & Paykel anticipates investing another $9.7 million in new manufacturing plant and equipment and $12 million) in working capital for DCS through to December 2005. DCS is being acquired on a debt-free basis.

DCS started 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. The company expanded into high-end, commercial-style indoor ranges, cooktops, and ovens through the 1990s.

DCS products are manufactured at its factory in Huntington Beach, CA, U.S. The factory is located close to Fisher & Paykel's main U.S. sales and distribution facilities in Irvine, CA, U.S.

For the 8 months to Aug. 31, 2004, DCS sales were $75.8 million. Fisher & Paykel said sales growth was achieved despite a lack of investment in new manufacturing equipment and processes, minimal marketing spending, and management changes over recent years, all of which have impacted earnings. This led to a restructuring of the business, which opened the door for Fisher & Paykel to acquire the company.

As a result of changes in distribution and initial costs associated with integrating DCS with Fisher & Paykel's operations in the U.S., it is expected that Fisher & Paykel's net profit after tax for the year to March, 31 2005 will be reduced by approximately $1.3 million. However, the acquisition is expected to contribute $3.3 million to net profit before taxation in the calendar year to Dec. 31, 2005. This corresponds to an EBIT of $7.7 million.

"Importantly, the acquisition meets all of our threshold criteria. Its long-term strategic value to Fisher & Paykel Appliances is considered significant," Mr. Bongard said.

Also, because the acquisition will almost double Fisher & Paykel's sales revenue in the U.S., the appliance maker said it will make the U.S. 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," Mr. Bongard said.

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