Agreement to Buy Metal-Testing Firm : Burbank’s Trio-Tech Widens Base

Depending on semiconductors for a livelihood can be a risky business these days. Although a few bright spots are emerging, the industry has been in a prolonged slump.

That lesson has not been lost on Burbank-based Trio-Tech International, which makes semiconductor testing equipment and runs semiconductor testing laboratories in the United States and abroad.

Charles Wilson, Trio-Tech’s president, said the company has “wanted to diversify and broaden our base, so we aren’t subject to the ups and downs as much.”

Decided to Buy Business

With that in mind, Trio-Tech decided to buy a new business. Last week it announced an agreement to acquire MQS Inspection, which does non-destructive testing on metals and other materials for several Fortune 500 industrial companies.

Using ultrasound and other technology, MQS equipment can be used to test metal parts for flaws without actually bending the parts until they breaks.

Trio-Tech will pay $14 million in cash to the parent of MQS, GEO International of Stamford, Conn., an oil-field services and quality assurance company that is selling subsidiaries to reduce its debt after years of losses.

GEO does not believe it sold MQS cheaply. William P. Constantini, its vice president and general counsel, said MQS would have taken eight to 10 years to turn enough profit to match the purchase price.

Delighted by Deal

But Wilson said he is delighted by the deal. He said Chicago-based MQS, which has 20 testing laboratories nationwide, will reduce Trio-Tech’s reliance on semiconductors, which are the small, densely printed circuits used in electronic equipment, particularly computers.

The deal also will nearly double Trio-Tech’s size. For the fiscal year ended June 28, Trio-Tech earned $2.8 million, or $1.14 a share, on sales of $22 million. It has about 500 employees, Wilson said, with 60 to 70 in Burbank.

If the acquisition is completed, the merged company will have sales exceeding $40 million and 900 employees worldwide. Both sides said the deal is expected to close within about 60 days, after Trio-Tech reviews the transaction and arranges financing. Wilson said Trio-Tech will raise the cash through a private placement of convertible debentures, which are bonds that can be converted into stock.