Viasystems Group, Inc.

101 S. Hanley Road, Suite 400
St. Louis, Missouri 63105
U.S.A.
Telephone: (314) 727-2087
Fax: (314) 746-2233
Web site: http://www.viasystems.com

Private Company
Incorporated: 1996 as Circo Craft Holding Company
Employees: 22,400
Sales: $751.5 million (2003)
NAIC: 334412 Printed Circuit Board Manufacturing

Viasystems Group, Inc. is a St. Louis-based provider of electronics manufacturing services (EMS) to original equipment manufacturers (OEMs). It primarily serves the telecommunications, automotive, computer, industrial, and consumer industries. The company operates 18 plants and other facilities located in the United States, Canada, China, France, Ireland, Italy, The Netherlands, and the United Kingdom. Products and services offered by Viasystems include the design and building of printed circuit boards, backpanel assemblies that connect printed circuit boards, thermal management equipment, wire harnesses and customer cable assemblies, and electromechanical enclosure systems such as equipment racks, cabinets, shelters, and walk-in cabins. Viasystems also helps customers with the procurement and management of materials, and with the assembly, integration, and testing of their products and complete systems. Major customers include General Electric, Delphi, Lucent, and Siemens.

Forming the Company in the Mid-1990s

Viasystems was incorporated in August 1996 as Circo Craft Holding Company to acquire Circo Craft Co. Inc., Canada's leading independent manufacturer of printed circuit boards, and the board business of Lucent Technologies. The money, some $330 million, was provided by the Dallas investment firm of Hicks, Muse, Tate & Furst Incorporated and the St. Louis-area investment and management services firm of Mills & Partners, Inc. The heads of the two companies had worked together on two prior ventures. Hicks, then operating under the Hicks & Haas name, burst onto the scene as a top leveraged buyout firm in the 1980s with the purchase of Dr. Pepper Co., which was then merged with Seven-Up Co. In 1989 Hicks teamed up with the chairman and chief executive officer of Mills & Partners, James N. Mills, to acquire Thermadyne Industries and other companies, forming Thermadyne Holdings. Mills served as chief executive officer and chairman of the board of the diversified manufacturer of cutting and welding products, wear-resistant products, and commercial and industrial floor cleaning equipment.

In 1993 Hicks and Mills again joined forces to buy Berg Electronics Corp. With Mills again taking over as CEO and chairman, Berg then completed nine strategic acquisitions to make itself into a global maker of electronic connectors for printed circuit boards as well as cable assembly products for computer and telecommunications customers. The partners then took Berg public in 1996. The October 1996 purchase of Circo Craft by Hicks and Mills was the first step in a bid to transfer Berg's success in the connector business to the printed-circuit board segment. Rather than fold the Circo and former Lucent assets into Berg, the partners opted to form a separate company. Circuit board makers were not generally embraced by investors and it was feared that shareholder value might be compromised by muddying Berg's business mix.

In January 1997 the Viasystems name was adopted and James Mills took over as CEO and chairman of the new concern. The strategy was to adopt the successful "buy and build" formula he had applied at Berg, with the aim of becoming a dominant global player in the PCB area and taking the company public. Already Viasystems was the second largest bare-board maker in the world and a force to be reckoned with in backpanel assemblies. It also had a number of acquisitions lined up to grow the company even larger and spread its global presence. In April 1997 Viasystems added Forward Group PLC, a major U.K. manufacturer of printed circuit boards with plants in England, Scotland, and South Africa. Subsequently another U.K.-based PCB manufacturer, Interconnection Systems Limited, was purchased. These deals greatly enhanced Viasystems' ability to serve the important European market. At this stage, the company also was taking steps to add plants in Mexico and establish a presence in Asia, as well as to fill in gaps in the U.S. market with the construction of facilities on both coasts. At the end of its first year of operation, Viasystems posted revenues of $795.3 million and a loss of $327.5 million.

Global Aspirations in the Late 1990s

Viasystems continued to expand through acquisitions in 1998. In January of that year it bought a PCB production facility in Sweden from Ericsson Telecom AB and a month later added Mommers Print Service B.V., a PCB company based in The Netherlands. Zincocelere S.p.A., an Italian PCB manufacturer with facilities in both Italy and England, was added in March. After this spate of activity, Mills declared that he was satisfied with the company's European footprint. Viasystems' European operations were then consolidated and structured into three business groups: Commercial Products, to serve customers primarily involved in the automotive, computers, datacom, industrial and instrumentation, and mobile telecommunications industries; Technology Products, to build PCBs and backpanels for high-end applications such as computer processing units and servers; and Special Products, to fabricate high-performance products primarily for defense and aerospace applications. Now that Viasystems had manufacturing facilities spread across North America and Europe, Mills hoped to focus next on Asia, thus establishing a global presence. Revenues for 1998 topped the $1 billion mark, and the company cut its net loss to $88 million.

The final step in Viasystems' global ambitions was taken in August 1999 when it paid $325 million to acquire the Kalex PCB manufacturing division of Termbray Industries International Holdings Ltd. Viasystems received two vertically integrated operations in China with a combined production capacity exceeding 15 million square feet, capable of producing double-sided and multilayer PCBs. As a result, Viasystems was now a true global PCB manufacturer, but it also was looking to evolve into a full-service CEM, thus making it a more valuable play when the company was ultimately taken public. For the year Viasystems grew sales to $1.1 million and recorded another sizable loss totaling $726.3 million.

Viasystems filed for an initial public offering (IPO) of stock in early 2000. In conjunction with the offering the company planned to acquired the wire-harness business of International Wire Inc. for $210 million. In the meantime, in keeping with its plan to become a global, full-service CEM, it acquired the cable assembly and power supply business of U.K.-based Marconi PLC at a cost of $115 million. With Morgan Stanley Dean Witter serving as the lead underwriter, Viasystems completed its IPO in April 2000. Although the price range was announced at $16–$19, the company was able to fetch $21 a share. As a result, the company netted $873 million, instead of the $500 million it had originally hoped to raise. About $500 million was earmarked to pay down a $950 million debt load. Investor enthusiasm quickly waned, however, as it did with many technology stocks at the time. Viasystems dipped as low as $8 a share, although it rebounded to the $16 range, putting the company in a difficult position to return to the market for additional funds to aid in its quest to surpass San Jose-based Sanmina Corp. as the largest CEM. In October 2000 Viasystems canceled a secondary offering in which it hoped to sell another 17 million shares to the public.

Despite canceling its offering, Viasystems did make several more acquisitions in 2000, including Top Line Electronics Corporation, a San Jose CEM; Lucent Technologies' Global Provisioning Center in Rouen, France, a fully integrated builder of PCBs for the radio telecommunications and transmission market; Laughlin-Witt Group, Inc., a CEM with plants in Orange County, California, and Beaverton, Oregon; and Accutec, an Oak Creek, Wisconsin, company involved in the metal enclosure business. Viasystems also built a 150,000-square-foot plant in Shanghai. The addition of these assets helped to boost Viasystems' revenues to more than $1.6 billion in 2000. But the company also posted another net loss of $136 million.

At the start of 2001 Mills was upbeat in the press about the state of Viasystems and its progress in becoming something of a one-stop CEM, but within a few weeks the prospects for the company quickly soured. A slowing economy had hurt all of the technology sector, leading to a sudden drop in orders. Some 1,700 jobs in North America and another 250 in Europe were soon eliminated and a good bit of work was transferred to the Chinese plants, where workers earned $1.66 compared with $18 an hour in Viasystems' Richmond plant. The company also cut back on its capital expenditures for the year, although management felt it was still a good idea to spend as much as $70 million to upgrade facilities in China. By June Viasystems was announcing that it would close plants in Richmond, Virginia, and in Puerto Rico. In July, Hicks agreed to commit to providing another $100 million in funds to help the situation, then two weeks later a shakeup took place in the upper ranks of management. James Mills stepped down as CEO, replaced by Viasystems' chief financial officer and Mills & Partners' president and chief operating officer, David Sindelar. A company spokesman insisted that Mills had not been forced out; rather, the 44-year-old Sindelar was simply ready to tackle more responsibility.

Mills remained as chairman of the company, and although that reassured investors that Viasystems was not making any radical changes, it did not prevent analysts from criticizing Mills. According to a 2001 article in EBN, "industry observers say a series of missteps by Mills in executing Viasystems' dual PCB fabrication and EMS identities has put the company behind the eight ball. . . . Some observers say Viasystems' troubles started when the company began expanding its global footprint to low-cost Asian and higher-cost European sites. Some analysts said the company bought manufacturing plants that were not viable and added to its debts." There was also speculation that Viasystems had made itself an attractive takeover target for an EMS company that wanted to establish itself in Asia.

Company Perspectives:

Solutions beyond limits.

Collapsing Sales in the Early 2000s

Sales in 2001 fell to $1.2 billion while the company's net loss grew to more than $500 million. All told, Viasystems owed more than $1 billion. Moreover, the price of Viasystems' stock fell below $1 on November 20 and after a month at this level it faced the prospect of being delisted by the New York Stock Exchange. In February 2002 Mills retired as chairman. By April the stock was delisted and the company resorted to the OTC Bulletin Board, the electronic exchange operated by the NASDAQ. To help in its efforts to reduce its debt and recapitalize, it hired a New York investment-advisory firm, Rothschild Inc. In October 2002 Viasystems filed a prepackaged bankruptcy restructuring plan that would eliminate $720 million in debt. As part of the plan, the company would be taken private, with its public debt replaced with privately held common and preferred stock.

Viasystems emerged from Chapter 11 bankruptcy protection in 2003. What kept the company afloat was its Chinese operations, where most production was shifted in order to cut costs. In 2003 Viasystems managed to generate revenues of only $751.5 million. In March 2004 it filed plans to conduct another IPO of stock, in hopes of raising $275 million. There were some positive trends emerging in the telecommunications industry that could bode well for the company's future, but the company's business remained extremely competitive, requiring a great deal of capital, and subject to severe price swings. The timing for an offering appeared right, but there were some questions about the long-term viability of the company. By July, amid fluctuating market conditions, management decided to withdraw the stock offering, opting instead for a private placement to current shareholders. But the success of that effort, as well as the future of the company, remained very much in doubt.

Principal Subsidiaries

Viasystems, Inc.; Viasystems International, Inc.; Shanghai Viasystems EMS Co. Ltd. (China); Kalex Printed Circuit Board Limited (Hong Kong); Kalex EMS (Hong Kong) Company Ltd.

Principal Competitors

Flextronics International Ltd.; Sanmina-SCI Corporation; Solectron Corporation.

Key Dates:

1996:: The company is formed.
1997:: The Viasystems name is adopted.
2000:: The company is taken public.
2002:: The company files for Chapter 11 bankruptcy protection.

Viasystems Group, Inc.

views updated

Viasystems Group, Inc.

101 S. Hanley Road, Suite 400
St. Louis, Missouri 63105
U.S.A.
Telephone: (314) 727-2087
Fax: (314) 746-2233
Web site: http://www.viasystems.com

Private Company
Incorporated: 1996 as Circo Craft Holding Company
Employees: 22,400
Sales: $751.5 million (2003)
NAIC: 334412 Printed Circuit Board Manufacturing

Forming the Company in the Mid-1990s

Global Aspirations in the Late 1990s

Company Perspectives:

Solutions beyond limits.

Collapsing Sales in the Early 2000s

Principal Subsidiaries

Viasystems, Inc.; Viasystems International, Inc.; Shanghai Viasystems EMS Co. Ltd. (China); Kalex Printed Circuit Board Limited (Hong Kong); Kalex EMS (Hong Kong) Company Ltd.