Jan 16th, 2013
Acquisition of Kopin Wireless for $75 million, placing to raise £16.5 million and trading update
IQE plc (AIM:IQE, "IQE", the “Company” or the "Group"), has agreed to acquire the compound semiconductor (“CS”) epiwafer manufacturing business (“Kopin Wireless”) of Kopin Corporation (“Kopin”) for total consideration of $75 million in cash (the “Acquisition”).
Kopin Wireless is the leading global manufacturer of heterojunction bipolar transistor (“HBT”) materials which are used in power amplifiers (“PA”), a key wireless component in mobile devices. These are produced using Metal Organic Chemical Vapour Deposition (“MOCVD”) epitaxial wafer technology.
- $60 million payable in cash (“Initial Consideration”) to Kopin on completion of the Acquisition (“Completion”) and $15 million payable in cash to Kopin on the third anniversary of Completion (“Deferred Consideration”)
- Significantly extends IQE’s market share and leadership in wireless industry supply and delivers a market leading position in MOCVD HBT
- Builds substantially on IQE’s risk mitigation strategy in wireless - adding Skyworks Solutions, Inc. (“Skyworks”), which has a long standing supply agreement with Kopin Wireless, as a major customer
- Taiwan manufacturing facility adds to IQE’s global manufacturing footprint and will provide the Group with a strong position to access the growing Asian semiconductor market Attractive terms - earnings enhancing from 2013 financial year onwards
Significant cost synergies of at least £7 million per annum expected from 2014
- New banking facility with HSBC for $40 million
- $20 million will be funded from the £16.5 million proceeds of the Placing (defined below)
- Organic cash flow to pay the Deferred Consideration of $15 million payable in January 2016
- IQE intends to raise approximately £16.5 million through a placing by the Joint Bookrunners, Espirito Santo Investment Bank and Canaccord Genuity Limited, of 56,900,961 new ordinary shares (“Placing Shares”) at a price of 29 pence per Placing Share (the “Placing Price”) (the “Placing”)
- The Placing Shares represent approximately 8.82 per cent. of the Group’s enlarged share capital following Admission (defined below)
- The Placing Price represents a discount of approximately 0.85 per cent. to the closing mid-market price of IQE’s ordinary shares of 29.25 pence on 9 January 2013, being the last practicable date before this announcement
- The books for the Placing will open with immediate effect and are expected to close no later than 4.30 p.m.
Trading update for 2012
For the year ended 31 December 2012, IQE expects revenue to be in the range of £87 million to £88 million, with earnings before interest, tax, depreciation and amortisation in the range of £16 million to £17 million and net debt as at 31 December 2012 of approximately £15.5 million.
Drew Nelson, CEO of IQE, said:
“This acquisition is our third key transaction in the past 12 months. It significantly enhances our scale and provides us with a highly complementary product line in the wireless space".
“The transaction marks another major step forward in our risk mitigation strategy, whilst significantly boosting our wireless market share. At the same time, it delivers excellent opportunities for additional business growth, particularly in Taiwan and from there into the Asian semiconductor market".
“This transaction will be a key driver of significant earnings and cash generation and also brings substantial financial and scale benefits. This will enable the Group to make significant cost savings from FY14 onwards and further underpins our leading position in the supply of wafers to the global compound semiconductor industry.”
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