Flextronics to buy rival electronics maker Solectron

Stuart Corner
Tuesday, 05 June 2007 06:18

IT Industry - Deals

Singapore-based electronics equipment maker, Flextronics, is to acquire its Californian rival Solectron, for $US3.6 billion to create what it says will be "the most diversified and premier global provider of advanced design and vertically integrated electronics manufacturing services."
The combined company will have operations in 35 countries, a combined workforce of approximately 200,000 employees, including approximately 4,000 design engineers and annual revenues in excess of $US30 billion across seven diverse customer market segments and several vertical component divisions.

Flextronics manufactures cellular handsets for several of the major vendors. Solectron, meanwhile is struggling: it lost its CEO to Dell in February and is undergoing restructuring and cutting jobs. There have been reports of an excess of capacity in original device manufacturing (ODM) market.

Flextronics CEO, Mike McNamara, said: "Solectron is an extremely important strategic addition to Flextronics and this combination transforms the landscape of our industry...Solectron's strength in the high-end computing and telecom segments will be an invaluable addition to Flextronics' existing capabilities and the combined company will be a market leader in most product market segments. We will be a larger, more competitive company and therefore better positioned to deliver supply chain solutions that fulfil our customers' increasingly complex requirements."

According to Flextronics, the transaction will provide Solectron's customers with an enhanced portfolio of design and vertically integrated capabilities, greater scale, and expanded supply chain leverage along with the advantages of an increased low cost global footprint."

Citigroup Global Markets has committed to provide Flextronics with a $US2.5 billion seven-year senior unsecured term loan to fund the cash requirements for the transaction. Following closure, Solectron will become a wholly owned subsidiary of Flextronics, and Solectron shareholders will own approximately 20% to 26% of Flextronics' outstanding shares. The acquisition is expected to close by the end of calendar year 2007.