Rakon forms outsourced manufacturing JV

French operations primarily affected by the deal

Auckland-based GPS crystal developer Rakon has signed a joint venture agreement with Indian owned and based Centum Electronics to manufacture some Rakon products alongside in Bangalore, India.

Bombay listed Centum will hold 51% of the venture and Rakon 49%.

The new venture will primarily pick up frequency control design and manufacturing activities Rakon now undertakes in France.

"Rakon and Centum have entered into agreements which protect the intellectual property rights of both parties, provide Rakon with exclusive rights to sell outside of India all products manufactured by the JV, and Centum with similar exclusive rights within India," a statement to the New Zealand Stock Exchange today says.

Rakon says the deal will enhance its margins and earnings in its oven controlled crystal oscillators (OCXO) product range. OCXO design, high specification OCXO manufacturing and other operations will continue in France, the company says.

Rakon says when the JV is fully operational later this year, annual EBITDA is expected to improve by more than NZ$3 million.

"This is as a result of the improved cost structure and contribution from the former Centum business. After transaction costs Rakon will also book a one-off gain on the transaction of approximately NZ$1 million, reflecting the realisation of the gain over book value of assets transferred to the JV," its statement says.

Rakon already has a relationship with Centum through the outsourced manufacturing of its voltage controlled crystal oscillator (VCXO) range.

The transfer of equipment and manufacturing of products will begin in late March.

Brent Robinson, Rakon managing director.says the joint venture will provide Rakon with more readily scalable global OCXO production in order to meet existing and future customer demand.

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