Smartflex Systems in Talks With Suitor

Smartflex Systems Inc., a Tustin provider of electronics manufacturing services, said it is in discussions to be acquired by another company and has hired an advisor to oversee the process.

Smartflex would not identify the company involved in the negotiations or the investment advisor.

The move reflects a broader consolidation taking place in the industry, which has struggled with excess capacity and customer demands for lower prices, analysts said.

“Companies that are too small on their own are seeking out bigger and better-capitalized businesses to merge with,” said Tom Moro, an analyst with Advest Inc., an investment bank.

Smartflex disclosed the merger discussions Thursday night, hours after the stock surged on the Nasdaq market. The shares moved up 44%, or $1.44 a share, to $4.75. On Friday, the stock rose 69 cents a share to $5.44 in heavy trading.

The company, which has a market value of nearly $35.2 million, should attract interest from potential suitors, Moro said.

“They’ve got some attractive technologies and engineering talent,” he said. “They’ve got some assets.”

But the company has been struggling this year. For the first quarter, Smartflex lost $4.85 million as sales dropped more than 37%. And despite its gains the last two sessions, the stock has lost 25% of its value this year.

In April, the company said it would dismiss about 220 employees, including 15 at its Tustin headquarters. Last September, Smartflex said it planned to eliminate 165 jobs.

Company officials were unavailable for comment Friday.