Assa Abloy in Talks for More U.S. Acquisitions – CEO
Swedish Company Seeks to Take Advantage of Improved Construction Outlook
In an interview at the company's headquarters, Johan Molin said "we are currently in talks with some companies" with revenue in the range of $100 million to $300 million. Last year, the company, which sells a wide range of mechanical and electromechanical locks as well as automatic and security doors, purchased a handful of U.S. security-oriented companies, including Ameristar Fence Products Inc. and North Carolina-based door maker Amarr.
Mr. Molin's U.S. focus is becoming more acute amid sluggish conditions in Europe and his belief that U.S. building activity will be robust this year. "You can already see that it's about to take off," Mr. Molin said of U.S. construction activity. "There are derricks everywhere and the activity at architectural firms is high."
The company is widely exposed to a European construction industry, which has yet to recover from the 2008 recession. The U.S. optimism follows a 22.7% jump in housing starts in November to the highest level in six years—a figure that stands in contrast to the outlook for some important European markets.
Assa Abloy, founded two decades ago, is one of several Nordic firms looking to the U.S. use a stockpile of cash to purchase smaller U.S. companies that have strong market positions in sectors dependent on building and industrial activity. Swedish ball-bearing maker SKF SKF-B.SK +0.53% AB and engineering company Atlas Copco ATCO-A.SK -0.23% AB are two others following the trend.
Assa Abloy's plan for additional acquisitions comes as the company looks to lift sales of its commercial and industrial door-making division significantly, from SEK8 billion ($1.23 billion) in the first nine months of 2013 to SEK20 billion by the end of next year. The company reported SEK47 billion in sales in 2012.
Mr. Molin took the helm in 2005 and has overseen more than 100 acquisitions since then. He wants the company to become the leading provider of automated doors in the U.S.
Mr. Molin said that Assa Abloy has in the past few years been able to buy up many companies to "a reasonable price" for cash. The U.S. market at the end of 2013 represented 35% of the company's total revenue compared with 29% at the end of the previous year.
"It has been an extremely advantageous situation for us," the chief executive said.
The plan does carry risks. In a recent note to investors, J.P. Morgan Cazenove said the pace of acquisitions will initially also dilute its margins. But Assa Abloy also continues to rapidly cut costs and reinvest the savings into presence and product development, "which is producing stronger organic growth than the market," the bank said.