Zebra Technologies has plunked down $126 million in an all-cash deal to buy WhereNet and gain a piece of the active RFID market.
Based in Vernon Hills, Ill., Zebra has long been a maker of printer solutions. Several years ago, it began offering printer-encoders for passive RFID labels. Now, executives say, the firm wants to broaden Zebra’s RFID reach by adding active-tag technology to its product portfolio.
WhereNet, headquartered in Santa Clara, Calif., provides real-time location systems (RTLS) utilizing active RFID tags. Its customers include numerous companies in the automotive, distribution and logistics, aerospace and defense, manufacturing and industrial sectors. Nissan North America, for example, uses WhereNet’s system to track inbound auto parts, as well as new vehicles rolling off the assembly line at its Canton, Miss., factory (see Nissan North America Installs RFID-based Real-Time Locating System).
“This is a great strategic move for Zebra,” Ed Kaplan, Zebra’s chairman and chief executive officer, announced today during a news conference revealing the acquisition. “The deal provides Zebra with a new platform for growth and a leading position in a high-growth segment.”
Kaplan pointed to several studies that have earmarked active RFID and RTLS as fast-growing technologies. For example, he said, IDTechEx, a U.K. consultancy specializing in RFID, has estimated that the value of active RFID systems sales, including tags, will grow from $55 million in 2006 to $6.78 billion by 2016.
“Passive RFID is currently at early stages of adoption,” Kaplan explained, adding that “even under the best of circumstances, scan ranges rarely exceed 10 feet.” Active RFID, which has been around for several years and offers far greater read ranges, “is a natural complement to passive RFID technologies.”
A number of health-care institutions are implementing RFID-based RTLS to track assets and patients. IDTechEx says RTLS technology will be the second-largest contributor to RFID’s growth in the health-care industry (see Report Sees Sharp Rise in Pharma RFID). For now, however, Zebra plans to concentrate on industries in which WhereNet has already made inroads. These include automotive, defense, transportation and logistics.
“Health care is clearly a market that has a lot of need for real-time location systems, and it is clearly an opportunity for future growth,” said Philip Gerskovich, Zebra’s senior vice president of corporate development. “But we think WhereNet was very astute in concentrating on the other markets, because it often takes a long time for the health-care industry to adopt new technology. However, we absolutely believe, going forward, [that] there are great opportunities, but for near-term we will focus on existing markets.”
Zebra will run WhereNet as a separate business unit led by Dan Doles, WhereNet’s CEO. Zebra executives said they predict WhereNet will generate sales of about $50 million in 2007, up from $36 million in 2006.
The acquisition is subject to WhereNet shareholder approval and is expected to close by the end of January. Zebra claims it has agreements from WhereNet shareholders representing more than 85 percent of the voting stock to vote in favor of the purchase. The company expects the transaction to be minimally dilutive to Zebra’s net income in 2007, Gerskovich said, and to be accretive thereafter. The company plans to announce its 2006 year-end and fourth-quarter financial results on Feb. 14.