(Nasdaq:ORBK) has exercised its option to buy out Orbotech Schuh, a manufacturer of Automated Optical Inspection systems for assembled printed circuit boards.

Orbotech received the five-year option when it acquired 51% of the German company for $13 million in August 1997. Commenting on the timing of the deal, Orbotech CFO Amichai Steinberg says the price would have risen and Orbotech would have lost money if it had have carried out the acquisition at a later stage.

When buying control of Schuh in 1997, Orbotech undertook the option to buy the company's remaining equity for cash plus common stock. But the two companies agreed that the consideration payable for exercising the option could be converted into a single lump sum of 27.7 million deutschemarks, or $13.3 million, during January 2001.

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Steinberg says that buying Schuh was Orbotech's way into the electronic assembly market. He believes the company's contribution to Orbotech's bottom line will increase.

In 1999, Schuh contributed $13 million to Orbotech's revenue, which totaled a consolidated $278 million. Schuh is expected to generate revenue of $22 million to $24 million for 2000, and $30 million for 2001.

Goodwill arising from the acquisition, which the company calculates at $12 million, will be amortized over five years. Steinberg says that a small team will remain working in Germany, and that production will be moved to Israel. It isn't necessarily cheaper for us, but it's important that production be adjacent to development and vice versa, Steinberg explained.

Orbotech specializes in testing solutions for electronics manufacturers, mainly for PCBs and flat-panel displays.

The company will be publishing its fourth-quarter 2000 and annual 2000 results on February 7. Salomon Smith Barney believes the company will beat forecasts, which are for earnings per share of 63 cents for the quarter, and $2.43 for the year 2000. Fourth-quarter revenue is expected to reach $100 million.