Mar 13 2007
Cree, Inc., a leader in LED lighting, today announced a definitive agreement to acquire privately held COTCO Luminant Device Ltd. (“COTCO”), headquartered in Hong Kong, in a combined stock and cash transaction valued at approximately US $200 million.
The acquisition of COTCO, a leading supplier of high brightness LEDs in China, will provide Cree with strategic access to this important and fast-growing solid-state lighting market. It also will provide Cree with a low-cost manufacturing platform and will help Cree to leverage its expertise in LED chips and intellectual property, as well as its investment in sales and marketing, to offer more value-added products in key markets for high performance LED screens, signage and solid-state lighting.
Under the terms of the agreement, which has been approved by the board of directors of both COTCO’s parent company, COTCO Holdings Limited (“COTCO Holdings”), and Cree, COTCO Holdings will receive $70 million in cash and 7,604,785 shares of Cree stock valued at $130 million, based on the average price over the previous twenty trading days. Additional consideration of up to $125 million is tied to the COTCO business achieving specific financial targets over the next two fiscal years. Payment of additional consideration, if any, may be made in cash, shares of Cree stock or a combination of cash and stock, at Cree’s option, subject to certain limitations. This acquisition is targeted to increase annual revenue on a consolidated basis by approximately 15% to 20% over current First Call consensus estimates in fiscal 2008, and is also targeted to increase earnings per share on a consolidated basis by approximately 5% to 10% over current First Call estimates for fiscal 2008. The transaction, which is subject to customary closing conditions, is targeted to close by late March or April 2007.
“This acquisition is the next step in our strategy to enable the solid-state lighting revolution,” said Chuck Swoboda, Cree chairman and CEO. “We are excited about having the COTCO management team join the Cree family and continuing to build on their success. We look forward to working together to expand our business in China and to transform Cree into a truly global company.”
“We are excited about the merging of COTCO into Cree, which will provide COTCO with access to Cree's technology and comprehensive IP resources. This combination will strengthen COTCO’s leadership position in the solid-state lighting supply chain,” said Paul Lo, COTCO Holdings chairman.
In connection with the acquisition agreement, the parties also entered a shareholders' agreement under which COTCO Holdings agrees that it will not sell or transfer any of the Cree shares it receives at closing until one year after the closing date, at which time COTCO Holdings may sell or transfer up to 50% of the shares. The contractual restrictions on the remaining shares will lapse on the second anniversary of the closing. COTCO and a subsidiary of COTCO Holdings will also enter into a long-term supply agreement at closing that will require the subsidiary to purchase a quarterly volume of LED lamp products, consistent with historical purchases, from COTCO on competitive terms.