Bel Fuse Inc. Strengthens Power Segment with Enercon Deal

Bel Fuse Inc. Expands Power Segment Through Enercon Acquisition

Bel Fuse Inc. (“Bel” or “the Company”) (NASDAQ: BELFA and NASDAQ: BELFB), a leader in powering and connecting electronic circuits, has made a significant move by announcing its acquisition of a majority stake in Enercon Technologies, Ltd. This strategic agreement marks a pivotal step in amplifying Bel's presence in the aerospace and defense sectors, reflecting the Company's vision to enhance its product portfolio globally.

Details of the Acquisition

The acquisition comes with an enterprise value estimated at $400 million. Bel will acquire an 80% stake in Enercon for $320 million upfront, accompanied by potential earnout payments up to $10 million contingent on performance in the 2025-2026 period. The plan includes purchasing the remaining 20% by early 2027, based on Enercon's future EBITDA performance. This transaction is set to elevate Bel's exposure in the aerospace and defense sector significantly, increasing from 17.5% to an impressive 31% of total revenue based on the latest fiscal year-to-date figures.

Transaction Highlights

As a key provider of power conversion and networking solutions within military and aerospace markets worldwide, Enercon's impressive gross margin of 46% and an Adjusted EBITDA margin of 32.5% for the past fiscal period positions it attractively against Bel's historical margins. The acquisition is projected to be accretive to Bel's GAAP EPS within one year post-transaction, with non-GAAP earnings positively impacted from day one. It is anticipated that net leverage will remain under 2.0x shortly after the deal closes, enhancing Bel’s financial footing.

Future Growth and Market Expansion

With Enercon as part of its family, Bel is not only expanding its product offerings but also positioning itself strategically in key markets. This includes leveraging Enercon's established presence in North America and India, and enhancing manufacturing capabilities with a skilled engineering team based in Israel. Daniel Bernstein, CEO of Bel, expressed excitement about the acquisition's potential to deepen partnerships with customers in critical applications.

Leadership Perspectives

Eyal Shary, CEO of Enercon, remarked on the exciting opportunity this acquisition presents for his team, highlighting the potential for growth and global expansion under Bel's guidance. Further, Enercon board members commented on the strategic nature of this partnership, emphasizing ongoing support from Fortissimo Capital. They conveyed a shared vision for accelerating growth for Enercon through Bel’s resources and market reach.

Financial Strategy and Support

To finance this acquisition, Bel plans to utilize a combination of cash reserves and an expanded credit facility. This strategic financial decision shows Bel's commitment to ensuring a seamless integration while sustaining financial stability. As Enercon operates independently within the Bel Power and Solutions segment, its distinctive offerings will complement Bel's existing solutions.

About Bel Fuse Inc.

Founded with a commitment to innovation, Bel Fuse Inc. designs and manufactures a vast array of products that power, protect, and connect electronic circuits. Positioned across various sectors, including telecommunications, computing, and automotive, Bel's extensive product groups serve a diverse clientele, showcasing the Company's dedication to meeting evolving technological needs. Bel's operational footprint spans globally, ensuring accessibility and service excellence.

Next Steps and Conference Call

Bel has arranged a conference call to discuss the acquisition further, where stakeholders can gain insights into the strategic direction following this significant merger. Interested parties are encouraged to participate in this highly anticipated discussion.

Frequently Asked Questions

What is the significance of Bel's acquisition of Enercon Technologies?

The acquisition enhances Bel's exposure to the aerospace and defense market, increasing its operational capabilities and revenue streams significantly.

How will this acquisition affect Enercon's operations?

Enercon will continue to operate independently under Bel, combining its innovative solutions with Bel's resources for broader market reach.

What financial measures support the acquisition?

Bel will finance the acquisition through existing cash reserves and the expansion of its credit facility to secure favorable transaction terms.

When do Bel and Enercon expect to complete the acquisition?

The acquisition is expected to finalize by the end of 2024, pending customary closing conditions and regulatory approvals.

How does this acquisition impact Bel's financial outlook?

The deal is projected to be accretive to Bel's earnings within the first year and maintains a sustainable financial leverage ratio post-acquisition.

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