Zacks_Analysts' Blog : Garmin Buys South African Distributor - Analyst Blog

Garmin Ltd. (GRMN) announced the acquisition of Garmin Distribution Africa (Pty) Ltd. (GDA), the distributor of its automotive, outdoor recreation, fitness and marine products in Southern Africa, and Garmap (Pty) Ltd., a South African mapping and mobile applications provider. Financial terms of the deal were not disclosed.

GDA, which has a workforce of 70, will be renamed Garmin Southern Africa (Pty) Ltd. and will continue operations from its current headquarters and warehouse facility located near Johannesburg.

The acquisition will help Garmin to attain cost synergies and greater visibility into its supply chain. It will also support Garmin’s key retailers, customers and original equipment manufacturers in the region. No doubt, the acquisition will strengthen Garmin’s presence in this rapidly growing South African region.

In April, GDA had announced a new partnership with Navteq, the leading global provider of maps, traffic and location data. This alliance will provide Garmin with the most accurate and up-to-date maps for Africa. Under the partnership, Garmin’s recently launched 2xxx range of Portable Navigation Devices will come pre-loaded with NAVTEQ mapping, which will provide all Garmin nuvi 2xxx and 37xx series users a better navigation experience.

Garmin is one of the leading providers of navigation devices in outdoor/fitness, aviation, marine and automotive markets and is increasing its international presence through various acquisitions. The Navigon acquisition in June gave the company an opportunity to expand its position in Europeby strengthening its relationships with mobile phone, automotive and consumer electronics OEMs.

Since its core automotive business is disappearing rapidly, alternatives are needed to boost its business. Acquisitions make wise use of cash in our opinion. Additionally, Garmin’s diversification strategy is going well, with product launches and tie-ups with OEMs generating both growth and visibility.

Garmin shares carry a Zacks #3 Rank, implying a Hold rating for the short term (1-3 months).