The electronics arm of electric-vehicle maker BYD Co. agreed to buy Jabil Inc.’s manufacturing business in China for 15.8 billion yuan ($2.2 billion), expanding its production base in the world’s largest mobile arena.
BYD Electronic International Co., a non-wholly owned unit of one of China’s biggest EV makers, is taking over the US company’s product manufacturing business located in Chengdu and Wuxi, China, it said in a statement Monday. The pact includes the manufacturing of products for existing customers.
The deal marks the latest retreat by a manufacturer from China, as geopolitical tensions force suppliers to scout alternative locations for making the components that go into everything from Apple Inc. iPhones and iPads to Dell computers. It also accelerates BYD’s expansion into mobile electronics. The EV giant’s electronics arm makes a wide variety of products from smartphone cases to wireless modules used in cars, and it operates plants in China and Vietnam that make components for Apple.
Shares of BYD Electronic dropped 5.6% in early Hong Kong trading, while parent BYD advanced 2.1%.
Jabil has been one of the largest contract manufacturers in China, hiring tens of thousands of workers in Sichuan, Guangdong and Jiangsu provinces to make and assemble parts for Apple. The company said in a separate statement the sale will allow it to “enhance our shareholder-centric capital framework, including incremental share buybacks.”
Amid the prolonged US-China trade war, some Apple suppliers have reduced their exposure to China. Catcher Technology Co. sold two key businesses in China to a local peer, while iPhone maker Wistron Corp. sold its Apple assembly plants in the country to Luxshare Precision Industry Co.
What Bloomberg Intelligence Says
Jabil’s deal with BYD Electronic to sellits mobility business-related production arms inChina for $2.2 billion might imply a forward price-to-sales ratio of 0.58x, we calculate, much higherthan the BI Global EMS/ODM peer group’s 0.35xand Jabil’s own valuation of 0.39x. The sale at apremium could help Jabil further reduce exposure to consumer electronics, focus on new growthdrivers and boost buybacks.
- Steven Tseng and Charles Shum, analysts
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--With assistance from Debby Wu.
(Updates with stock reactions in fourth paragraph.)
