(Reuters) -TE Connectivity said it will buy utility grid products maker Richards Manufacturing Co for about $2.3 billion in cash, as it looks to strengthen its position in the electrical utilities market to take advantage of a power demand surge.
With companies racing to develop and adopt artificial intelligence, demand for power from data centers has accelerated, and is forecast to double within five years, rising from 176 TWh in 2023 to between 325 and 580 TWh in 2028.
Last month, President Donald Trump threw his support behind a $500 billion pledge by tech groups and investors to develop infrastructure for AI facilities.
Besides aging infrastructure, extreme weather events and a push for greener energies have also prompted the need for upgrades and more resilient grid systems.
“The acquisition of Richards Manufacturing aligns with our strategy and positions us to further capitalize on an accelerating grid replacement and upgrade cycle in North America,” said TE Connectivity CEO Terrence Curtin on Wednesday.
Shares of the company were up about 4% before the bell.
The Galway, Ireland-based company said it will acquire Richards Manufacturing from funds managed by Oaktree Capital Management, L.P. and members of the Bier family, who were long-standing owners of the business.
It looks to finance the deal, expected to close in June, through a mixture of cash and additional debt.
Upon deal completion, Richard’s business will become a part of TE’s Industrial Solutions segment, and is expected to contribute about $400 million to annual sales.
TE expects the acquisition to be accretive to its sales growth and adjusted operating margins. It expects an accretion of about 10 cents to its adjusted EPS in the first full year.
Goldman Sachs & Co. LLC is serving as the financial advisor for TE, and Davis Polk & Wardwell LLP as the legal counsel.
(Reporting by Abhinav Parmar in Bengaluru; Editing by Savio D’Souza, Sriraj Kalluvila and Shinjini Ganguli)
