Randon buys Hercules to make trailers in the US
In search of more hard currency revenue, Randon decided to pay $39.5 million for US trailer and semi-trailer company Hercules Enterprises, based in New Jersey.
This is the first incursion of the industrial giant from Caxias do Sul in the production of its main product in the United States, the country that is already one of its biggest export destinations.
The deal does not need antitrust approval. The operation is being carried out through Randon’s subsidiary in the United States, Randon Holdco, and the final amount may change depending on the variation in working capital and earnout
The acquisition must be completed within four months.
The deal comes at a time when Randon saw its revenue originating in the United States rise 37% in one year, with sales in the American market reaching US$ 25.7 million in the first quarter. However, given the faster rise in sales to Mercosur countries and Chile, the US lost a 2 percentage point share of Randon’s exports.
Within Randon, the purchase of Hercules is seen as a milestone as it is the first major incursion of one of its main products (and which gave rise to the company itself) in a mature market.
“It’s a milestone because it’s the entry into the US market of our ‘mother company’,” CEO Sérgio Carvalho told the Brazil Journal. In addition, “the market for trailers and semi-trailers is practically entirely above the equator.”
Despite trailers and semi-trailers being more commoditized products, the executive sees that this is Randon’s first step to take and produce higher value-added products in the US. The order within the company is to get more revenue in hard currency and increase the resilience of the business.
One of Randon’s biggest concerns is exactly with the currency. Despite the recent devaluation of the real against the dollar, the company sees that the Brazilian currency will strengthen again, which can affect the company’s competitiveness and, consequently, exports.
In the first quarter, for example – with the dollar falling below R$5 at times – truck exports fell by 22.4% compared to the previous quarter, with the lack of components also hampering the results.
That’s why producing locally has become as important for Randon as continuing to grow in the US market – even more so at a time when a recession is looming. In the US, the company already operates through Fras-le, its manufacturer of auto parts such as brake linings and pads, in addition to Autotom, which operates in automation and robotics.
To top it off, there is a window of opportunity with the 250% surcharge placed by the US government for Chinese companies, which dominated the market.
No wonder Randon is studying new M&As in the United States and other countries in the northern hemisphere.
“Our intention is to continue prioritizing the international part, but that does not mean that we will not invest more in Brazil. We have grown at very substantial rates in the last five years and we have to continue with this accelerated growth”, said Carvalho.
Randon is capitalized after a BRL 500 million debenture issue in February, in addition to a BRL 629 million follow-on from Fras-le – in which Randon placed most of the funds.
After starting the day on a high, Randon shares operate close to stability this Friday.
Source: Brazil Journal