News Article
Buy one, sell one
Kulicke & Soffa announces agreements to acquire Orthodyne Electronics and divest the K&S wire business unit. The transactions enhance the company’s position as a supplier of interconnect solutions.
Kulicke & Soffa Industries, (K&S) announced that the company has entered into definitive agreements to acquire substantially all of the assets of Orthodyne Electronics Corporation, a supplier of wedge bonders, and sell the K&S wire business unit to W.C. Heraeus, a precious metals and technology group that has a leading position in its markets.
Under the terms of the Orthodyne agreement, K&S will fund the acquisition of Orthodyne with approximately 7.1 million shares of K&S common stock, plus $80 million in cash. If the transaction is not consummated by October 31, 2008, the purchase price will be approximately 19.6 million shares of K&S common stock and no cash. The deal includes possible earn out consideration up to an additional $40 million in cash if certain financial objectives are met by Orthodyne over the next three years. The closing of the transaction, which is expected within approximately 60 days, is subject to certain working capital adjustments and closing conditions, including regulatory approvals.
“The acquisition of Orthodyne is in line with our stated strategy and positions K&S to capitalise on our strengths in equipment manufacturing and further cement our position as the leading supplier of interconnect solutions,” commented Scott Kulicke, Chairman and Chief Executive Officer of K&S. “Orthodyne is a fast growing, profitable market leader and provides us with deeper penetration into the discrete side of the semiconductor market, particularly in the attractive power management and hybrid module markets.”
Orthodyne, a privately held company based in Irvine, CA, is a supplier of both wedge bonders and wedges for the power management and hybrid module markets. Orthodyne’s focus on the fast growing power management market has delivered a double digit compound annual revenue growth rate over the last five years, resulting in 2007 revenues of $110 million. Orthodyne’s executive team, led by Gregg Kelly, will be retained, as will all 280 employees.
Under the terms of the wire business agreement, Heraeus will pay $155 million in cash to K&S for its wire business unit, subject to certain working capital adjustments. K&S and Heraeus will also enter into a strategic technical collaboration agreement that provides reciprocal access to research and development expertise to exploit the technical synergies that come from approaching the wire bond process as a system involving the bonder, the tools and the wire. The closing of the transaction, which is expected within approximately 60 days, is subject to certain closing conditions, including regulatory approvals.
Mr. Kulicke commented, “The wire business is one we believe strongly in, especially with exciting new wire products such as MaxSoft. It is a very healthy business, with excellent customer relationships, and it will be a very solid asset for Heraeus. However, the working capital requirements of this business have become significant and, as a result, no longer make financial sense for us. Heraeus is ideally positioned to support the continued growth and exploit the advanced wire products we have developed in this business by leveraging its significantly larger balance sheet. The wire business fits very well into the core competencies of Heraeus, which deal with precious metals and all related services such as refining and trading worldwide. One of the key considerations in selecting a buyer from what was a robust bidding process was the ability to develop a long term strategic alliance with a partner we knew well and respected. We are excited by the technology alliance we have formed with Heraeus, which will allow us to exploit the technical synergies that exist between these two businesses.”
“W. C. Heraeus intends to continue building on its market position and strengthen its presence in Asia and North America,” noted Dr. Peter Köhler, Managing Director of W. C. Heraeus, the largest business segment of the Heraeus Group. “The acquisition of the K&S wire business unit and its production facilities in Singapore and Switzerland will strengthen our market position, especially in Asia, which is the focal point of the world’s semiconductor industry and a strategically important site in close proximity to customers.”
In order to illustrate the potential financial impact of each of these transactions, provided are the following table of K&S’s fiscal 2007 results assuming the inclusion of Orthodyne’s results and the divestiture of the wire business.
Fiscal 2007 Results (000’s) Net Revenue Gross Profit Gross Margin
K&S As Reported $ 700,404 $ 180,934 25.8%
K&S Without Wire and With Orthodyne $ 480,949 $ 220,747 45.9%
“These transactions would have significantly improved our gross profit, both in absolute terms and as a percentage of sales,” commented Maurice Carson, Chief Financial Officer of K&S. “Orthodyne is a profitable and growing business. Additionally, the divestiture of our wire business would have significantly reduced the working capital needs of the company and improved cash flow.”
Mr. Kulicke concluded, “These transactions demonstrate our commitment to find and drive profitable growth and strengthen our balance sheet. Coupled with last year’s acquisition of Alphasem, K&S will posses a core competency across a full suite of interconnect technologies for a variety of microelectronic applications, providing even greater value to our now broader base of customers. K&S will also serve a larger Total Available Market for back end assembly equipment, providing more growth opportunities as the industry’s cycle begins to turn up in the future.”
Under the terms of the Orthodyne agreement, K&S will fund the acquisition of Orthodyne with approximately 7.1 million shares of K&S common stock, plus $80 million in cash. If the transaction is not consummated by October 31, 2008, the purchase price will be approximately 19.6 million shares of K&S common stock and no cash. The deal includes possible earn out consideration up to an additional $40 million in cash if certain financial objectives are met by Orthodyne over the next three years. The closing of the transaction, which is expected within approximately 60 days, is subject to certain working capital adjustments and closing conditions, including regulatory approvals.
“The acquisition of Orthodyne is in line with our stated strategy and positions K&S to capitalise on our strengths in equipment manufacturing and further cement our position as the leading supplier of interconnect solutions,” commented Scott Kulicke, Chairman and Chief Executive Officer of K&S. “Orthodyne is a fast growing, profitable market leader and provides us with deeper penetration into the discrete side of the semiconductor market, particularly in the attractive power management and hybrid module markets.”
Orthodyne, a privately held company based in Irvine, CA, is a supplier of both wedge bonders and wedges for the power management and hybrid module markets. Orthodyne’s focus on the fast growing power management market has delivered a double digit compound annual revenue growth rate over the last five years, resulting in 2007 revenues of $110 million. Orthodyne’s executive team, led by Gregg Kelly, will be retained, as will all 280 employees.
Under the terms of the wire business agreement, Heraeus will pay $155 million in cash to K&S for its wire business unit, subject to certain working capital adjustments. K&S and Heraeus will also enter into a strategic technical collaboration agreement that provides reciprocal access to research and development expertise to exploit the technical synergies that come from approaching the wire bond process as a system involving the bonder, the tools and the wire. The closing of the transaction, which is expected within approximately 60 days, is subject to certain closing conditions, including regulatory approvals.
Mr. Kulicke commented, “The wire business is one we believe strongly in, especially with exciting new wire products such as MaxSoft. It is a very healthy business, with excellent customer relationships, and it will be a very solid asset for Heraeus. However, the working capital requirements of this business have become significant and, as a result, no longer make financial sense for us. Heraeus is ideally positioned to support the continued growth and exploit the advanced wire products we have developed in this business by leveraging its significantly larger balance sheet. The wire business fits very well into the core competencies of Heraeus, which deal with precious metals and all related services such as refining and trading worldwide. One of the key considerations in selecting a buyer from what was a robust bidding process was the ability to develop a long term strategic alliance with a partner we knew well and respected. We are excited by the technology alliance we have formed with Heraeus, which will allow us to exploit the technical synergies that exist between these two businesses.”
“W. C. Heraeus intends to continue building on its market position and strengthen its presence in Asia and North America,” noted Dr. Peter Köhler, Managing Director of W. C. Heraeus, the largest business segment of the Heraeus Group. “The acquisition of the K&S wire business unit and its production facilities in Singapore and Switzerland will strengthen our market position, especially in Asia, which is the focal point of the world’s semiconductor industry and a strategically important site in close proximity to customers.”
In order to illustrate the potential financial impact of each of these transactions, provided are the following table of K&S’s fiscal 2007 results assuming the inclusion of Orthodyne’s results and the divestiture of the wire business.
Fiscal 2007 Results (000’s) Net Revenue Gross Profit Gross Margin
K&S As Reported $ 700,404 $ 180,934 25.8%
K&S Without Wire and With Orthodyne $ 480,949 $ 220,747 45.9%
“These transactions would have significantly improved our gross profit, both in absolute terms and as a percentage of sales,” commented Maurice Carson, Chief Financial Officer of K&S. “Orthodyne is a profitable and growing business. Additionally, the divestiture of our wire business would have significantly reduced the working capital needs of the company and improved cash flow.”
Mr. Kulicke concluded, “These transactions demonstrate our commitment to find and drive profitable growth and strengthen our balance sheet. Coupled with last year’s acquisition of Alphasem, K&S will posses a core competency across a full suite of interconnect technologies for a variety of microelectronic applications, providing even greater value to our now broader base of customers. K&S will also serve a larger Total Available Market for back end assembly equipment, providing more growth opportunities as the industry’s cycle begins to turn up in the future.”
