January 11, 2008

Technitrol Inc, announced it has agreed to acquire the capital stock of Sonion A/S, a  world-leading producer of highly innovative microacoustic transducers and  micromechanical components for manufacturers of hearing instruments, advanced  acoustic devices, medical devices and mobile communication devices. These  products are used in hearing aids, high-end earphones, medical devices,  wireless handsets and other mobile terminal equipment. Sonion is also a leader  in microelectromechanical systems (MEMS) microphone technology.
The purchase price is  approximately $385 million in cash, based on current exchange rates. The  acquisition will be financed through a new credit facility and cash on hand.  Closing of the transaction is expected before the end of February 2008.

Sonion is based in Roskilde,  Denmark and also has facilities in Poland, China, Vietnam and the Netherlands.  It employs about 4,900 people, including more than 140 research and  development personnel. Revenues in 2007 were approximately $180 million.  Technitrol intends to keep Sonion’s current management and professional  personnel largely in place.
Technitrol expects that this  acquisition will be EBITDA-positive from the outset but will dilute earnings  per share for part of the first year due in significant part to the interest  expense on acquisition-related debt, which is largely non-tax deductible in  the several quarters after the closing, and the non-cash amortization of  certain acquisition-related intangibles. Thereafter, Technitrol expects that  Sonion will be accretive to earnings in the subsequent year by approximately  $0.25 per share.
Sonion’s hearing instrument  components business (approximately 68% of 2007 revenues) consists of  subminiature high-performance transducers and plastic electromechanical  switches, volume controls and other modules. Included in these products are a  variety of components for increasingly popular "receiver-in-canal" hearing  aids. Hearing instrument components will become a separate product division of  Technitrol’s Electronic Components business. Sonion’s mobile terminal  components business (32% of revenues), which produces wireless handset  receivers, speakers and microphones, will be integrated into an existing  division, which includes antennas and other radio frequency components and  modules.
"Sonion’s businesses fit  seamlessly into our Electronic Components group," said Technitrol Chairman and  Chief Executive Officer James M. Papada, III. "They serve rapidly growing  markets with engineering-intensive, mission-critical products. They thrive on  close, collaborative design relationships with customers, and they require  expertise in high-volume, quality production operations. With more than 500  active technology patents, the Sonion team has done a superior job of leading  microacoustic component technology across all of its product lines. Sonion is  an innovation powerhouse. Technitrol is thrilled to deliver this terrific  opportunity to our shareholders as we continue our drive to further acquire  innovative product lines in high-growth adjacent market spaces in which we can  utilize our core competencies."
Growth drivers for Sonion’s  hearing aid, acoustical and medical products include an aging population;  increasingly sophisticated, effective and inconspicuous hearing instruments;  increasing use of hearing aids in both ears; the popularity of very small  hearing instruments worn within the ear canal; and increasing penetration of  high-end earphones and medical devices in emerging markets. "Sonion has played  a leading role in the evolution of subminiature transducers (receivers,  microphones and telecoils) and control modules. Its market share currently  stands at about one-third for transducers and more than one-half for  subminiature electromechanical parts," Papada said. Analysts expect revenues  in this recession-hedged business to grow at more than 10% annually.
Comparable revenue growth is  assumed for mobile device components. "As with our current wireless  components, growth will be driven by sales of terminal devices such as  handsets, laptops and PDAs as well as increasing device sophistication, which  drives the need for more and better functionality per device," Papada said.  Currently, Sonion is one of several major suppliers of receivers, speakers and  microphones to the mobile device market.
Sonion was also an early  entrant into the disruptive technology called microelectromechanical systems  (MEMS), an area in which it has developed technological leadership. MEMS  microphones are much smaller and much more durable than conventional handset  microphones. Also, their potential applications extend well beyond mobile  phones, to hearing aids as well as critical sensors for automotive, industrial  and medical uses. The technology is catching on quickly. Analysts estimate  near-term market growth for MEMS components to be between 40% and 80% per  year. Sonion has volume MEMS production capabilities, including two cleanroom  facilities, and has patented critical technology related to the manufacture of  MEMS microphones.
"Technitrol will play a strong  role in helping Sonion expand its market presence and develop fully into a  truly lean global manufacturer and supplier," Papada said. "As part of our  Electronic Components team, Sonion can leverage a well-established global  sales network, an advanced supply chain management system and the benefits of  decades of continuous manufacturing improvement activity. Sonion gives  Technitrol a low-cost manufacturing presence in Vietnam, but at a relatively  early development stage, so that financial benefits of this manufacturing  strategy are still to be realized. In addition, we believe that we can achieve  efficiencies and improvements in our own existing operations as well as  Sonion’s as we integrate various SG&A functions globally."

Morgan Stanley is acting as  financial advisor to Technitrol in the Sonion transaction.

Source: Businesswire