Briggs & Stratton Expands in Brazil - Analyst Blog
13 Novembre 2012 - 2:00PM
Zacks
Briggs & Stratton
Corporation (BGG) recently announced that it has entered
into an agreement to acquire Brazil-based Companhia Caetano Branco
for approximately $60 million.
Founded in 1936, Branco is one of
the leading brands in the light power equipment market in Brazil
with a wide range of outdoor power equipment used mainly in light
commercial applications. Its products include generators, water
pumps, and light construction equipment. Branco generates annual
sales to the tune of around $40 million with operating margins of
13% to 17%.
The transaction, pursuant to
customary closing conditions, is expected to be completed in the
next three to four months. The acquisition will be funded from
available cash on hand or Briggs’ existing credit facilities. As of
September 30, 2012, Briggs & Stratton had $101.6 million cash
in hand on its balance sheet. The company also has $500 million
available under its revolving credit facility.
The acquisition is in sync with
Briggs’ strategy of expanding in the emerging nations with a focus
on extending its product portfolio in higher margin categories and
to diversify diversifying its geographic footprint. Post
acquisition, Briggs will benefit from Branco’s brand strength,
strong operational performance, and strong distribution network and
customer base in the region.
Brazil is a strategic fit for
expansion given its infrastructure requirements and high growth
opportunities. Brazil's economy has been steady over the last
decade. However, the momentum dipped last year and the government
forecasts growth this year at 2.5%. Brazil estimates a spending of
$110 billion annually over the next five years to meet its
infrastructure needs.
Brazil’s recent $66 billion
stimulus package, aimed at reviving the country's ailing road and
railway systems and to help bolster the economy, provides
significant growth opportunities. Brazil's construction
requirements have been on the rise based on the infrastructure
needs for hosting the 2014 FIFA World Cup and the 2016 Olympic
Games in Rio de Janeiro.
Based in Milwaukee, Wisconsin,
Briggs & Stratton is the world's largest producer of gasoline
engines for outdoor power equipment. Its wholly owned subsidiary,
Briggs & Stratton Power Products Group LLC, is North America's
number one manufacturer of portable generators and pressure
washers, and is a leading designer, manufacturer and marketer of
standby generators, along with lawn, garden and turf care products
through its popular brands. The company competes with Honda
Motor Co., Ltd. (HMC), Kawasaki Heavy Industries,
Ltd. (KWHIY) and Deere & Company
(DE). Briggs & Stratton currently retains a short-term Zacks #3
Rank (Hold).
BRIGGS & STRATT (BGG): Free Stock Analysis Report
DEERE & CO (DE): Free Stock Analysis Report
HONDA MOTOR (HMC): Free Stock Analysis Report
(KWHIY): ETF Research Reports
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