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Jabil buys into a new market

A $195-million deal addsmaking technically demanding products for low-volume customers tothecompany's repertoire.

By JEFF HARRINGTON
Published February 8, 2005

Jabil Circuit Inc. is acquiring Varian Inc.'s electronics manufacturing business for $195-million in cash, giving the St. Petersburg company expertise to make more complex medical and scientific instruments.

The deal, disclosed Monday, is expected to close in early March.

Jabil started as a circuit board maker, and even as it has swelled into a global player it relies largely on making high-volume, mass-produced electronics for brand-name companies.

The purchase of Varian's manufacturing arm represents a shift to low-volume, more technically demanding products.

Varian, a California scientific instrumentation company, makes electronics for the medical, communications, industrial and aerospace industries. There is little overlap with Jabil's customer base.

The sale includes a 200,000-square-foot operation in Tempe, Ariz., and two leased sites in California. The deal will add 1,000 employees to Jabil's 40,000-member work force.

For Varian, the sale solves two problems. As part of Varian, the manufacturing arm was at a disadvantage persuading Varian's competitors to use its services. Secondly, it could not serve the overseas needs of its customers with its limited U.S. presence.

Jabil offers not only independence but a global network of facilities in 19 countries.

Varian will have "a bigger sandbox to play in," Jabil chief executive Tim Main said in a conference call with analysts.

Added C. Wilson Runn, Varian vice president for electronics manufacturing: "Jabil and Varian have the same vision and the same goal: to offer customers great services in the right locations."

After selling its manufacturing unit, Varian will remain a Jabil customer, Main said.

In recent years, Jabil has shifted much of its U.S.-based production to lower-cost sites in China, Malaysia, Mexico and elsewhere. Main reassured Varian workers joining Jabil that their U.S. facilities weren't in jeopardy of closing.

"Even if some of the production moved offshore, there's ample demand to continue to use these (Arizona and California) facilities," Main said. "They have the know-how. ... We don't expect there will be any substantial dislocation."

--Jeff Harrington can be reached at harrington@sptimes.com or 813226-3407.

[Last modified February 8, 2005, 00:21:16]