MILPITAS, Calif. (AP) – Singapore-based contract electronics manufacturer Flextronics International Ltd. said Monday it is purchasing contract electronics maker Solectron Corp. in a cash-and-stock deal worth about $3.6 billion.
Solectron shareholders will be able to convert each of their shares into either 0.3450 shares of Flextronics shares or $3.89 per share in cash. The terms stipulate that no more than 70 percent and no less than 50 percent of Solectron shares will be converted into Flextronics shares.
The cash portion of the deal is a premium of about 15 percent over Solectron's closing price of $3.37 on the New York Stock Exchange on Friday, while the stock portion represents a 20 percent premium.
“By joining forces, we expect the increased scale will enable us to further extend our market segment reach and leverage an increased vertical integration opportunity, realize significant cost savings, and better serve the needs of our combined customers, employees and shareholders,” Flextronics Chief Executive Mike McNamara said in a statement.
Flextronics said Citigroup Global Markets Inc. has committed to providing a $2.5 billion seven-year senior unsecured term loan to fund the cash portion of the acquisition, including the refinancing of Solectron's debt if required.
Solectron will become a subsidiary of Flextronics after the deal closes, with Solectron shareholders owning about 20 percent to 26 percent of Flextronic's outstanding shares.
As part of the agreement, Solectron can nominate two individuals approved by Flextronics to the board of the combined company.
Flextronics expects the deal to add at least 15 percent to its earnings.
The transaction is expected to close by the end of the year, subject to customary closing conditions including the approval of both companies' shareholders, certain regulatory approvals and other customary closing conditions.