TELEDYNE-FLIR ANALYSIS


Will Teledyne deal trigger more acquisitions?


With Teledyne set to acquire Flir, we asked two industry analysts to give their take on the $8bn purchase


Dimitrios Damianos and Eric Mounier at Yole Développement examine the market landscape


W


hen Teledyne acquired Flir earlier this year, many industry players were surprised. Buying Flir – the


market leader in thermal imaging cameras – plugs Teledyne’s infrared thermal detector gap at a time when Yole Développement predicts this market to grow from $4.5bn in 2019 to $7.5bn in 2025, according to the recent report Termal Imagers and Detectors. Flir also brings machine vision cameras


to Teledyne’s portfolio, making the US industrial conglomerate a massive player in machine vision. Now holding 16 per cent of the industrial camera segment, Teledyne becomes the joint-second largest market player, alongside Cognex, leaving Keyence, Japan first with a 19 per cent share. But what does the future hold for


Teledyne with Flir? On thermal imaging cameras, Covid-19 gave Flir a boost, with demand for devices to screen for elevated skin temperature increasing from $1.2bn to $3.16bn in the last year. Growth in this segment will slow as the world deals with coronavirus, but rising demand for applications such as driving monitoring and night vision will ensure the thermal imaging market remains buoyant. However, a key threat looms. Tanks


Combined sales estimated at $5bn


The acquisition adds Flir’s thermal and infrared imaging technologies to Teledyne’s visible imaging capabilities. It will increase the digital imaging segment of Teledyne’s business from 32 to 59 per cent, with Teledyne’s expected combined sales reaching $5bn once the acquisition is complete. Robert Mehrabian,


executive chairman of Teledyne, said: ‘At the core of both our companies is proprietary sensor technologies. Our business


models are also similar: we each provide sensors, cameras and sensor systems to our customers. However, our technologies and products are uniquely complementary with minimal overlap, having imaging sensors based on different semiconductor technologies for different wavelengths.’ Under the terms of the


agreement, Flir stockholders will receive $28 per share in cash and 0.0718 shares of Teledyne common stock for each Flir share, which implies a total purchase price of


$56 per Flir share based on Teledyne’s five-day volume weighted average price on 31 December. As part of the transaction,


Teledyne has arranged a $4.5bn 364-day credit commitment to fund the transaction and refinance certain existing debt. Teledyne expects to fund the transaction with permanent financing prior to closing. Net leverage at closing is expected to be approximately four times adjusted pro forma EBITDA, with leverage less than three


times by the end next year. Teledyne recorded Q4 sales


of $809.3m. The company’s digital imaging segment’s Q4 net sales were $262m, a decrease of 2.3 per cent over the same period in 2019. In Q3 of last year, Flir


recorded $466.4m of revenue, compared to $471.2m for the prior year. The transaction, which has been approved by the boards of both companies, is expected to close in the middle of the year, subject to the receipt of required regulatory approvals.


to Covid-19 and a demand for cheap surveillance systems, Chinese thermal imaging manufacturers, including GuideIR and Hikvision, made huge progress in 2020, chipping at Flir’s market share. Te jury is out on whether this is the start of a growing trend or a one-time success – US trade restrictions may thwart progress – but Teledyne will have to keep a close eye on competition from China. Meanwhile, strong growth is anticipated in the industrial camera market, including


‘Teledyne will have to keep a close eye on competition from China’


machine vision. Yole forecasts the market to grow from $3.6bn in 2020 to $5.5bn in 2026, fuelled by factory automation, factory-automated data collection, medical applications, robotic mobility and more (Machine Vision for Industry and Automation 2021 report). Although the market has multiple players,


with its stronger presence Teledyne is primed to capture market share. Still, the g


4 IMAGING AND MACHINE VISION EUROPE FEBRUARY/MARCH 2021


@imveurope | www.imveurope.com


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36