Gentex Corp., a maker of automotive mirrors and electronics that currently has no long-term debt, will borrow at least $300 million for its $700 million purchase of Johnson Controls Inc.’s HomeLink product line.
The rest will be funded with cash or cash equivalents, Chief Financial Officer Steve Downing said on the Zeeland, Michigan-based company’s second-quarter earnings conference call. Gentex said it has $595 million in cash and short-term investments.
The HomeLink purchase will be Gentex’s first addition of debt in a “very, very long time,” said Lisa Richlich, the company’s coordinator of investor relations. Gentex will use both fixed-rate debt and a credit line and the debt won’t exceed $375 million, she said.
Gentex, which had $1.1 billion in revenue last year, is looking to the acquisition to expand its business. The company has forecast that HomeLink will increase annual sales by $125 million to $150 million. Buying HomeLink is “a better way of returning shareholder value,” Downing said today. The purchase was announced last week.
The move “highlights a change that they’re willing to take this debt on,” said Matthew Stover, an analyst with Guggenheim Securities in Boston. “I think their historic aversion to debt maybe was a little overzealous. They will comfortably pay this back.”
The HomeLink garage-door opener system has been incorporated into Gentex’s mirrors for 10 years. The company expects to close the purchase by the end of September.
Gentex reported second-quarter net income of $52.1 million, or 36 cents a share, exceeding the 32-cent average of 12 analysts surveyed by Bloomberg. Quarterly revenue rose 2.4 percent to $287 million.
Shares fell 5.7 percent to $22.03 at the close in New York. Gentex has gained 17 percent this year, compared with a 21 percent rise for the Standard & Poor’s MidCap 400 Index.