Delta Manufacturing To Restructure Soft Ferrites Business

Delta Manufacturing Ltd. is making significant changes to its soft ferrites business. The company’s board of directors has approved a two-part plan:

Transfer of Business: Delta Manufacturing will transfer its soft ferrite manufacturing operations to MMG Ferrites Private Limited (MMG). MMG is currently a wholly-owned subsidiary of Delta Manufacturing. This transfer will be executed as a slump sale, meaning the entire business will be sold as a single unit
Dilution of Stake: Delta Manufacturing will sell 50% of its stake in MMG to Premo, S.L., a Spanish company specializing in the design, manufacture, and sale of electronic components.¹ This move will make MMG a joint venture between Delta Manufacturing and Premo, S.L.

These decisions are subject to shareholder approval.

Key Insights:

Focus on Core Business: This restructuring suggests Delta Manufacturing might be streamlining its operations to focus on its core business of magnets and garment trims.
Strategic Partnership: The joint venture with Premo, S.L. could provide MMG with access to new technologies, markets, and expertise, potentially boosting its growth.
Enhanced Value: The partnership could increase the overall value of the soft ferrites business, benefiting Delta Manufacturing despite the dilution of its stake.

Investment Implications:

Short-term Volatility: The restructuring might lead to short-term volatility in Delta Manufacturing’s stock price as investors assess the implications of the deal.
Long-term Growth Potential: The strategic partnership and focus on core competencies could lead to long-term growth for Delta Manufacturing. Investors with a long-term horizon might view this as a positive development.
Monitor Performance: Investors should closely monitor the performance of MMG post-restructuring and how this contributes to Delta Manufacturing’s overall financials.

Sources:

Delta Manufacturing to Restructure Soft Ferrites Business