General Cable Acquires Prestolite Wire for Greater Access to Growing Auto Market

Nov. 16, 2012
General Cable Corp., Highland Heights, Ky., announced the acquisition of Prestolite Wire LLC, a privately-owned manufacturer based in Plymouth, Mich., with production facilities in the U.S. and Mexico. Prestolite makes a broad range of wire and cable products and harnesses, mostly for automotive original equipment manufacturers (OEMs) and their “tier one” suppliers.

The automotive market is evolving in a number of ways, among them a shift to more extensive onboard communication and control systems and expanded use of electric drivetrains. That means (among other things): more wire.

General Cable Corp., Highland Heights, Ky., highlighted this shift in automotive demand when it announced last week the acquisition of Prestolite Wire LLC, a privately-owned manufacturer based in Plymouth, Mich., with production facilities in the U.S. and Mexico. Prestolite makes a broad range of wire and cable products and harnesses, mostly for automotive original equipment manufacturers (OEMs) and their “tier one” suppliers. Terms of the deal were not disclosed. In 2011, Prestolite reported revenues of $170 million.

“In addition to growth trends forecasted for new vehicles over the next couple of years, vehicle designs are rapidly evolving due to demands for greater fuel efficiency and enhanced communication capabilities,” said Craig Horton, General Cable’s product manager, Automotive, in a General Cable release. “OEMs are implementing alternative materials, resulting in higher operating temperatures, electric or hybrid propulsion technologies, enhanced communication systems and interconnectivity of vehicle management systems. As a result, the complexity and volume of wire and cable products consumed in vehicle designs is expected to continue to increase.”

Prestolite’s products focus on flexibility, abrasion resistance and high temperature insulation. General Cable already has a presence in the car market, but was particularly attracted to Prestolite’s “sharp focus on high temperature and abrasion- and corrosion-resistant applications,” according to Roger Roundhouse, senior vice president and general manager, Transportation Wire & Assemblies, General Cable, in a release. “This acquisition is highly complementary to our existing transportation related businesses as approximately 90% of Prestolite’s revenues are generated from products that are incremental to the company’s existing product portfolio. We are excited about the growth opportunities that will be afforded to us as a result of this acquisition through new products as well as through greater access to the growing and evolving automotive segment of the wire and cable industry,” Roundhouse added.

Greg Ulewicz, president of Prestolite, will remain with General Cable and continue to run the Prestolite Wire business. In the release, he said he was pleased to see Prestolite acquired by a strategic buyer. “The combination of General Cable’s broader capabilities and geographic reach coupled with Prestolite’s product offering and access to markets in the transportation related industry makes synergistic sense and presents significant future opportunities for our combined business,” Ulewicz said.

Also this week, General Cable reported third-quarter earnings above its management’s expectations. The company earned $75.4 million in the quarter on revenues of $1.5 billion. The earnings got a boost from the company’s “rest of world” (ROW) operations and growth in submarine and land-based turnkey projects, which offset seasonal sluggishness in its core North American and Europe and Mediterranean businesses.

The quarter’s results included about $48 million in sales from its blockbuster acquisition of Alcan Cable’s North American operations. That deal closed on Sept. 4, so Alcan contributed less than a month’s sales to the quarterly total.

The company’s ROW segment saw volume improve in the quarter as previously delayed aerial transmission projects in Brazil and high-voltage projects for export from Thailand were shipped. The company also benefited from electrical infrastructure investment and construction activity in Latin America as well as the ongoing recovery of demand patterns in Thailand following the severe flooding experienced in 4Q 2011. “Also, order rates for rod mill OEM customers and electrical distributors normalized as metal prices settled and began rising over the latter part of the quarter. As a result, overall volume for the third quarter was slightly better than expected,” said the company’s earnings release.

The company also said volume was consistent with its expectations across most of its business units in North America. “Seasonal demand patterns in the company’s utility businesses following a strong second quarter, coupled with an industrial slowdown, broadly reduced demand for wire and cable products during the third quarter of 2012 as compared to the second quarter of 2012. Demand for electrical infrastructure products including industrial and specialty cables, particularly those used in natural resource extraction and transit applications, remains relatively stable year over year.”

Looking ahead to the fourth quarter and yearly results, the company said, “U.S. demand for cables used in industrial and data communications applications is weakening beyond typical seasonality and wind applications have slowed considerably as tax incentives are set to expire at the end of the year. Housing, however, is positive and should help support demand for utility and construction related cables.”