Glendale, Calif.-based Avery Dennison Corp. is spending $190 million (1.31 billion RMB) to acquire Zhuozhou, Hebei-based Yongle Tape Co. Ltd., which says it's the world's largest PVC tape manufacturers and a producer of polymeric plasticizer, PVC film, pressure-sensitive adhesive materials and tapes.
Yongle Tape, which makes cable harnessing and insulation tapes, supplies the automotive, electrical and communication industries both in China and abroad.
Yongle executives said the Feb. 6 deal would boost its research and product development capabilities and give Yongle's product portfolio better access to European and North American markets.
Last year, Yongle's sales were about 1.1 billion yuan ($160 million). Founded in 1985, Yongle has 1,200 staff and production facilities in Zhuozhou and Shanghai.
Avery Dennison will buy Yongle from the company's management and private equity firm ShawKwei & Partners. The purchase price could rise by an additional $55 million if performance targets are met over the next two years.
The acquisition is expected to close at midyear and would have scant impact on earnings per share in 2017, Avery Dennison said.
"With its well-regarded products and extensive customer relationships, Yongle Tape is an excellent strategic fit with our company and a strong partner for our growing business in industrial materials," said Mitch Butier, Avery Dennison president and CEO.
"This acquisition advances our strategy to expand our global capabilities, while accelerating our growth and increasing our scale in the high-value industrial materials and health care segments," he said.
Mike Johansen, vice president and general manager of Avery Dennison's industrial and health care materials businesses, said Yongle will strengthen the U.S. firm's position in the global automotive sector and its product offerings to industrial customers.
Yongle Chairman Wong Fung said the deal would boost research and development.
"Avery Dennison and Yongle Tape share a strong commitment to service and continuous innovation," he said. "Avery Dennison brings significant technical and R&D capabilities to this union, which will accelerate our product development at Yongle Tape, while its global distribution networks will open new growth opportunities for the Yongle Tape portfolio in Europe and North America."
Avery Dennison specializes in pressure-sensitive and functional materials for the consumer packaging, graphical display, logistics and other industries, including in pressure-sensitive adhesives, high-speed coatings, roll-to-roll processing, films, coatings and others.
Avery Dennison has operations in more than 50 countries and more than 25,000 employees worldwide. Sales in 2016 were $6.1 billion.
Founded in 1999, ShawKwei & Partners is a private equity fund manager with offices in Hong Kong and Singapore.