On March 31, 2023, Hengtong Group reached an important agreement with Germany's Leoni Group to complete the acquisition of Leoni's wholly-owned subsidiary J-fiber GmbH.
Who is Hengtong Group:
Hengtong Group is a multinational company with a wide range of expertise including fiber optical communication, power transmission, EPC turnkey service, maintenance, IoT, big data, e-commerce, new materials, and new energy. The company is the largest manufacturer of Optical Fiber and Power Cables in China and is ranked among the top 10 worldwide by Integer. Additionally, Hengtong is ranked among the top 3 producers of optical fiber communication products globally, supplying about 25% of the domestic market volume and 15% of the international market volume.
Hengtong operates more than 70 wholly-owned and holding companies, three of which are listed on the Shanghai, Hong Kong, and Indonesian stock exchanges. It has 11 manufacturing bases in various regions, including Europe, South America, Africa, South Asia, and Southeast Asia. Hengtong has a presence in over 40 countries and regions worldwide, supplying products to over 150 countries and regions.
Hengtong is committed to innovation and social responsibility, striving to become the most advanced systematic integrator and internet service provider globally by steadily transforming to intelligent manufacturing. Social responsibility is regarded as the company's first responsibility, with the establishment of the Hengtong Charity Foundation and donations of over 700 million Yuan to various causes.
Introduction to Leoni's subsidiary J-fiber GmbH:
J-fiber GmbH is located in Jena, Germany, known as the "Optics Valley," with over 30 years of experience in fiber optic manufacturing. It is one of the leading suppliers of specialty fibers in Europe and the only large-scale fiber optic manufacturer in Germany. In 2007, Leoni acquired a 51% stake in J-fiber Group, and in 2012, it acquired the remaining shares. J-fiber's factories mainly produce standardized high-performance OM1-OM5 multimode fibers, providing high-quality products and services to a wide range of customers in the optical communication industry. It has significant brand influence in Europe, the Middle East, North America, and Asia.
Chinese companies are accelerating their acquisition of foreign companies：
The concept of overseas mergers and acquisitions was initially an important development strategy for overseas renowned companies, especially connector giants such as Amphenol and TE Connectivity. For example, according to incomplete media statistics, Amphenol has acquired nine companies in the automotive field, 11 companies in the communication field, ten companies in the industrial field, and four companies in the aerospace field in the past decade. From the number of acquired companies, it can be seen that Amphenol is sparing no effort to enhance its competitiveness in the communication, automotive, and industrial connector markets. Through dozens of acquisitions, Amphenol has achieved rapid expansion of its scale.
However, there are not many successful cases of domestic companies acquiring overseas factories in China. From Lenovo's acquisition of IBM's computer business to Hengtong Group' successful acquisition of Leoni's subsidiary J-fiber GmbH, what can China's cable& connector companies learn? The current foreign economic situation is not optimistic, with the Russia-Ukraine war and the depreciation of the US dollar. According to the logic of "financing during a bull market and acquisitions during a bear market," now is the best time for acquisitions, especially for overseas acquisitions, which can save a lot of money. It is understood that most of China's cable companies lack research and development capabilities, and most companies focus on low-end products. Therefore, product prices have become the competitive weapon of many small and medium-sized enterprises. As the cable industry is a typical industry where raw materials account for 70% to 80% of the total cost, the quality of wire and cable products is largely influenced by the quality of raw materials. Small companies can only offer ultra-low-priced products by focusing on raw materials, and the quality of their products is self-evident.
Currently, due to the continuous internal competition in the market, serious overcapacity, and the continuous rise in raw material prices, the cash flow of small and medium-sized enterprises is tight, leading to a series of vicious cycle patterns. Many small enterprises have been forced to shut down and exit the market, while industry leaders such as Hengtong Group and Luxshare Precision continue to rise in strength. To enhance industry standards, increase competitiveness, and adapt to environmental changes, they must continue to merge and restructure in the future.
However, Chinese companies are still novices in the mergers and acquisitions game, especially in the cable industry, which is a traditional manufacturing industry. Hengtong Group and Luxshare must shoulder the heavy responsibility of mergers and acquisitions while walking on a road full of obstacles and leading the way for latercomers.
Finally, congratulations to Hengtong Group on the successful acquisition of Leoni's subsidiary J-fiber GmbH, which brings surprising news to the industry.
