Allegion plc ALLE recently announced the divesture of its majority stake in its Venezuelan business to Venezuelan investors.
The divesture was aimed at curtailing risks related to an uncertain operating environment and a fluctuating Venezuelan bolivar, and thereby improve shareholders wealth. The company will incur a non-cash charge of about $26 million, owing to adjustment for currency translations.
Venezuela is presently in a volatile phase, worsened by weak economic growth and a complicated currency system. As a result, companies that have considerable exposure in the country are in for a rough tide ahead. In such a scenario, the company had to secure its position by divesting stake in its Venezuelan business.
Roughly 37% of Allegion’s 2014 net revenue was derived from outside the U.S. It is obvious that Allegion will remain susceptible to foreign currency fluctuations due to its global footprint. Nonetheless, acquisitions continue to be an important part of Allegion’s growth strategy.
In Jun 2015, Allegion entered into an agreement to acquire SimonsVoss Technologies GmbH, a leading electronic lock company based in Munich, Germany that provides complementary products and technology. In July, the company announced that it will acquire Milre Systek Co., LTD, a security solutions manufacturer in South Korea that provides high-quality and innovative electronic door locks. In July 2015, the company also announced the potential acquisition AXA Stenman Holding, a European residential and portable security provider of high-quality products and extensive customer and channel relationships. Subject to regulatory approval, these acquisitions are expected to close in the third quarter of the year.
While strategic divestures will release Allegion’s resources from risky operating markets, such acquisitions will ensure growth in the long term.
Allegion holds has a Zacks Rank #3 (Hold).
Stocks to Consider
Investors interested in the industrial products can consider Energous Corporation WATT, Net 1 Ueps Technologies Inc. UEPS and ASSA ABLOY AB ASAZY. All the three companies carry a Zacks Rank #2 (Buy).
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