With Civcom, from Israel, Padtec expands exporting base

Israeli city of Petach-Tikva, in the surroundings of TelAviv, is not a tourism place, but around six months ago became an interesting destination in the travel plans of Jorge Salomão Pereira, chief-executive at Padtec, manufacturer of optic communication equipment of Campinas (SP). The reason: the city houses Civcom, components supplier for Padtec, where Salomão saw a unique chance of acquisition last year.

Jorge Salomão Pereira, CEO at Padtec

Investment funds that held interest in Civcom were already about to leave the company and the business was offered for sale, says Salomão. Padtec, which was already capitalized, made a purchase proposal and started disputing Civcom with companies from other countries. Padtec won. Negotiations began in October last year and finished in February, says the executive.

The value of the deal was not revealed, but according to Salomão one of the Padtec's advantages was the proposal of maintaining Civcom as an independent company, installed in Israel. In several acquisitions, the purchasing company transfers its technology to its country of origin and extinguishes the acquired company, says the executive.

This was a concern of the Office of the Chief Science (OCS), body of Israel's Ministry of Industry, Commerce and Labor, which has powers to prevent international acquisitions, says Salomão. Padctec's proposal, says the executive, was already approved both by Civcom shareholders and by the OCS.

The acquisition of Civcom - which has 30 professionals, 27 of which with master's and doctorate degrees - provides Padtec the control over the production of components deemed as essential in its key operations - wavelength multiplexing. The concept is complicated, but is may be expressed, in a simple way, by the following comparison: image the fiber optic cable is a road. Multiplexing enables several new and independent lanes in the existing path. The result is that customers can increase information transmission capacity - which may be data, video, music, etc - without having to install new cables, which is expensive and complex.

The agreement also ensures Padtec an additional support to its internationalization strategy. Israel has commercial agreements (in the technology area) with countries with which Brazil does not have the same relationship, says Salomão. That is the case of Mexico, where Padtec opened a subsidiary at the end of November. Today, the company's products are overtaxed in the country, which means an automatic price increase of 20%.

Now, with the conclusion of the acquisition, Padtec studies the possibility to export parts to Civcom and assemble the equipment in Israel, with the purpose of exporting it, without overtax, to Mexico and to other countries.

Exports are an issue where we will put our efforts this year, says Rodin Spielmann, financial director of IdeiasNet, investment company and one of the main shareholders of Padtec. Last year, IdeaisNet increased Padtec's capital by R$20 million. With the trend, it increased its interest from 22.5% to 34.2%. The other 65.8% belongs to CPqD.

Last year, exports represented around 6% of all Padtec's revenues, but the company started taking a number of measures to expand its share. Between August and November, it opened three offices - in Buenos Aires, Bogotá and Mexico City. Now, in 2008, the idea is to strengthen business in Latin America and use Civcom as base for Europe and the United States.

In the American market, Padtec disputes contracts with a governmental promotion agency for the construction of a research network. We are in the final stage of the offer, which includes a testing stage, among other items, says Salomão.