Electronics Production | June 04, 2007
Flextronics to acquire Solectron
Flextronics and Solectron announced that the two companies have entered into a definitive agreement for Flextronics to acquire Solectron.
The combined company will have the broadest worldwide EMS capabilities, from design resources to end-to-end vertically integrated global supply chain services, which will enhance its ability to design, build, and ship a complete package product for its OEM customers. By combining Solectron's resources and skill sets, Flextronics will be able to provide more value and innovation to customers by leveraging the combined global economies of scale in manufacturing, logistics, procurement,design, engineering and ODM services. Operating in 35 countries, with a combined workforce of approximately 200,000 employees, including approximately 4,000 design engineers, the combined company's annual revenues will exceed $30 billion across seven well- diversified customer market segments and several vertical component divisions. Under the terms of the definitive agreement, unanimously approved by the Boards of Directors of both companies, shareholders of Solectron will receive total consideration currently valued at approximately $3.6 billion, based on the closing price of Flextronics ordinary shares on June 1, 2007. Each share of common stock of Solectron will be converted into the right to receive, at the election of each of the individual holders of Solectron shares, either, but not a combination of (i) 0.3450 shares of Flextronics or (ii) a cash payment of $3.89 per share, subject to the limitation that not more than 70% in the aggregate and no less than 50% in the aggregate of Solectron shares will be converted into shares of Flextronics. As a result, if holders of more than 70% of Solectron's outstanding shares elect to receive Flextronics stock, the shares of those holders to be converted into Flextronics stock will be proportionately reduced so that not more than 70% of Solectron's outstanding shares in the aggregate are converted into shares of Flextronics stock, with those holders' remaining shares converted into cash. In this case, Solectron shareholders electing cash consideration will receive cash consideration for all their shares. Alternatively, if holders of more than 50% of Solectron's outstanding shares elect to receive cash, the shares of those holders to be converted into cash will be proportionately reduced so that not more than 50% of Solectron's outstanding shares in the aggregate are converted into cash, with those holders' remaining shares converted into shares of Flextronics. In this case, Solectron shareholders electing stock consideration will receive stock consideration for all their shares. In no case (other than by virtue of fractional shares) will shareholders who elect to receive the stock consideration receive less than 70% of their total consideration in Flextronics stock. Alternatively, in no case will shareholders who elect to receive cash consideration receive less than 50% of their total consideration in cash. Based upon Solectron's 909.2 million shares and share equivalents outstanding on March 2, 2007, the range of cash to be paid and shares to be issued by Flextronics is as follows: While Flextronics will continue to evaluate alternative long-term financing arrangements, Citigroup Global Markets Inc. has committed to provide Flextronics with a $2.5 billion seven-year senior unsecured term loan to fund the cash requirements for this transaction (including the refinancing of Solectron's debt, if required). Following the acquisition, Solectron will become a wholly owned subsidiary of Flextronics, and Solectron shareholders will own approximately 20% to 26% of Flextronics's outstanding shares.
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