by Maureen Flanagan
Warner Power's acquisition of Daykin Electric Corporation creates a new powerhouse in the electrical power transformer market. An American Capital portfolio company since 1999, Warner Power, LLC, manufactures custom-engineered power conversion supplies, transformers, chokes and reactors. Its acquisition of Daykin, a leading manufacturer of transformer disconnects based near Detroit, MI, enables Warner to broaden its product line, expand its customer base and penetrate additional new market sectors.
The Daykin acquisition was closed by Warner on May 31, 2002. American Capital Strategies, Ltd. (Nasdaq: ACAS) provided $6 million of add-on acquisition financing.
"With similar, complementary products and markets, the combined companies are a natural fit. We anticipate great synergies in terms of cross-marketing opportunities and customer service as well as production efficiencies and cost savings," said Dick Longo, President of Warner.
New Hampshire-based Warner Power has been in business for more than 50 years, serving such well-known companies as Otis Elevator, Corning Glass, Amana and Teradyne. Its custom-engineered power systems are used in high-rise elevators, thermal processing, semiconductors and other industries. Warner also manufactures ballast systems that support medical and commercial applications.
In 1999, Warner was acquired from the WPI Group, Inc. by American Capital and equity investors that included Warner's senior management and Power Gems, Ltd., a leading UK ballast manufacturer. The buyout enabled Warner to enhance its position in the industries it serves and provide innovative, cost-effective solutions to a wide variety of power conversion and ballast applications. Click here for more information about Warner Power and American Capital's other portfolio companies.
Founded in 1968, Daykin designs, manufactures, and markets transformers, transformer disconnects and power supplies, most of which are used in industrial control applications for auto industry machine tools. Daykin's transformers, which are a smaller version of Warner's, provide power to electrical components within machine tools systems by stepping up or stepping down voltage from a primary power source. Some 70% of Daykin's products are transformer disconnects, or auxiliary power supplies that allow the machine tool operator to shut down the main power, but continue to run the lamps and controls during changeover, set-up and maintenance. The use of the transformer disconnect in automobile machine tools is mandated as a safety measure by the Society of Automotive Engineers and a consortium of automakers including Ford, Daimler/Chrysler and General Motors.
With a reputation for excellence, Daykin is well known in its market. Some engineers, in fact, refer to smaller power disconnects as 'Daykin Disconnects.' In addition manufacturing transformers, Daykin offers metal fabrication as well as powder coating capabilities that are used to enhance product quality. The company sells most products primarily through electrical distributors throughout the United States and in Canada.
"The combined companies pack a lot of power," said Myung Yi, American Capital Vice-President. "American Capital's add-on financing gives Warner the resources needed for continued growth and opportunity."
The acquisition of Daykin complements Warner's production of large transformers and gives Warner the opportunity to supply Daykin's products to such major customers as Otis Elevator. It also expands Warner's customer base, offering cross-marketing opportunities and the potential to supply other worldwide corporations with large and small power transformer products.
Warner also benefits from Daykin's strong niche in the automotive industry. Daykin's engineers work closely with the major auto companies as they develop specifications for automobiles and for the plants that manufacture their automobiles. Daykin is a certified provider for Ford, General Motors, and Daimler/Chrysler. The Big Three use certified providers for new product initiatives such as new engines, transmissions and body styles. Daykin is the sole specified supplier about 60% of the time the company's products are specified into a program or plant for a given piece of equipment.
The Daykin acquisition comes at a time when demand for machine tooling equipment is expected to increase as the Big Three US automobile manufacturers ramp up production. Despite the recession, Big Three capital spending has increased 5% since 1998 and auto makers are now positioning themselves to recoup market share lost to foreign manufacturers. Each new vehicle and new product launch require substantial tooling investments. Replacement tooling is expected to be an ongoing need as well.
Warner will also target other industries that could benefit from Daykin's transformer disconnects, including the printing, packaging, aircraft and aerospace industries. Warner has well-established relationships with companies in those markets, among them the world's largest printing press manufacturer and one of the world's biggest aerospace companies. Warner is also targeting applications for military and commercial projects.
Moving forward, Warner is well-positioned to exploit significant new market strengths. With newly acquired products and customers, Warner Power is on the way to a power-packed future.
