Teledyne Technologies Inc. got the new year off to a familiar start – by making an acquisition. The Thousand Oaks aerospace, marine and digital imaging products manufacturer announced on Jan. 6 it had bought OakGate Technology Inc. in Loomis, a software and hardware developer for electronic data storage devices. Financial terms of the deal were not disclosed. This acquisition follows two others from last summer as well as one from February in which it acquired the scientific imaging businesses of Roper Technologies Inc., for $225 million in cash. “The acquisition of OakGate allows Teledyne to provide a complete set of software and hardware used from the design of new data storage devices to the use of such devices in hyperscale cloud storage networks,” Teledyne Executive Chairman Robert Mehrabian said in a statement. The share price of Teledyne increased in the days following the OakGate announcement, rising by 2 percent by Jan. 10. Shares closed at $375.01 on Jan. 15. For the third quarter ending Sept. 29, Teledyne reported net income of $107 million ($2.84 a share), compared with net income of $90.3 million ($2.43) in the same period a year earlier. Revenue increased 11 percent to $802 million. Teledyne is expected to release its fourth quarter earnings before the end of the month. In a conference call with analysts to discuss the third quarter earning, company executives discussed the company’s acquisition strategy. In early August, Teledyne bought the gas and flame detection business of 3M Co. for $230 million in cash. The 3M business unit, based in The Woodlands, Texas, includes the brands Oldham, Simtronics, Gas Measurement Instruments, Detcon and select Scott Safety products. At the end of that month, it acquired Micralyne, a microelectromechanical systems foundry based in Edmonton, Alberta, Canada. Microelectromechanical systems, or MEMS, is the technology of microscopic devices, particularly those with moving parts. Teledyne also owns a foundry making the micro-parts in Quebec. The Micralyne acquisition made the Conejo Valley company the top independent multi-product microelectromechanical systems foundry in the world, company officials said at the time During the conference call, Mehrabian said the Micralayne acquisition brings new substrates used in making the micro-devices. “We usually use a lot of silicon substrates for our MEMS devices,” Mehrabian said in the call. “What Micralyne brings us is polymer and gold substrate capabilities, which is good for biotech. And it also has capability in developing new products and then transitioning those products to our larger MEMS facility.” Greg Konrad, an analyst with Jefferies Financial Group Inc. who follows Teledyne, said in a research note from October that mergers and acquisitions continue to be a focus of the company, which has about $1 billon in cash reserves for such transactions. “(Free cash flow) continues to support ongoing capital deployment,” Konrad put in the note. “Cash from operating activities was strong in the quarter at $150.9 million up from $141.9 million a year ago given higher operating income and recent acquisitions.” James Ricchiuti, an analyst with Needham & Co. LLC who follows Teledyne, asked during the conference call what the pipeline for acquisitions was like and how active it was. Mehrabian responded that it was the same and that small acquisitions have to fit well within the company portfolio and that the company was eyeing a couple of midsized acquisitions. “But competition is stiff, especially on the midsized acquisitions,” Mehrabian said. The company had been fortunate to be able to carve out two nice deals from two larger companies – Roper and 3M – and he felt positive there would others to follow that pattern, he added. “This is because those acquisitions we did in a two-month period with very little hassle,” Mehrabian said during the call. “Having said that, there are some acquisitions in our pipeline, and we certainly do have over $1 billion in capacity to do what we want.” Konrad said in his research note that Teledyne’s instrumentation business, specifically its environmental sub-segment, was helped by acquisition and higher volumes for process gas analyzers and laboratory and scientific instrument demand as its sales grew by 20 percent in the third quarter. Organic growth was flat. “Growth has been broad-based supported by GDP growth, with strength around end markets including laboratory and life sciences, regulatory agencies, petrochems and pulp and paper,” Konrad wrote. “The offset has been a headwind from pollution control instrumentation into Asia which is partially tied to tariffs.” The deal to buy 3M’s gas and flame detection business is expected to expand the environmental instrumentation’s portfolio and could add sales in the $120 million range, Konrad said in the note.
