KYOTO -- Kyocera will acquire SGS Tool of the U.S. for about 10 billion yen ($88.8 million) to add to its existing cutting-tool offerings for automotive, aircraft and other applications.
The Kyoto-based company announced the deal Wednesday. It will acquire all shares in SGS -- based in the state of Ohio -- from its founding family and turn it into a subsidiary on May 2.
SGS generates annual sales of about 7 billion yen to 8 billion yen, and specializes in finishing drills as well as medical cutting tools. Kyocera's cutting-tool sales reach into the tens of billions of yen, with strong business in Asia including Japan. It focuses on rough-cut tools, with such products accounting for some 90% of its lineup.
By acquiring SGS, Kyocera will be in a better position to pitch automotive and aircraft parts makers on its products.
Back in 2011, Kyocera acquired Danish tool maker Unimerco for about 20 billion yen to beef up its European business. Now, the company intends to strengthen North American operations with the SGS deal. Kyocera aims to increase its North American sales to 25 billion yen in fiscal 2018, up from around 10 billion yen now.
The global market for ultrahard tools is estimated at roughly 2 trillion yen. As Chinese production of smartphones slows, demand is on a decline. But demand for the tools in autos and aircraft is expected to rise over the medium to long term as more hard materials such as carbon fiber and titanium are used in bodies. Overseas players such as Sweden's Sandvik have high market shares, and Kyocera is trying to catch up.