TE Connectivity announced its plans to acquire Richards Manufacturing Co. for $2.3 billion in cash to bolster its position in the electrical utilities market and benefit from the increasing demand for power. The surge in power demand, driven by the development and adoption of artificial intelligence, is expected to double within five years, expanding from 176 TWh in 2023 to 325-580 TWh by 2028.
President Donald Trump has supported a $500 billion pledge by tech groups and investors to develop infrastructure for AI facilities. Factors like aging infrastructure, extreme weather conditions, and the growing push for sustainable energy sources have also fueled the necessity for grid system upgrades.
TE Connectivity CEO Terrence Curtin highlighted the strategic fit of the acquisition of Richards Manufacturing with the company's objectives in the North American market. The deal, set to close in June, will be financed through a mix of cash and additional debt. Following the acquisition, Richards' business will merge into TE's Industrial Solutions segment, projecting an annual sales contribution of approximately $400 million.
The acquisition is anticipated to boost TE's sales growth and adjusted operating margins, with an expected accretion of around 10 cents to its adjusted EPS in the first full year post-completion. Goldman Sachs & Co. LLC is acting as TE's financial advisor, with Davis Polk & Wardwell LLP providing legal counsel.