30 September 2010


IQE acquires antimony-based substrate maker Galaxy

Epiwafer foundry and substrate maker IQE plc of Cardiff, Wales, UK has acquired Galaxy Compound Semiconductors Inc of Spokane, WA, USA, a specialist manufacturer of antimony-based substrates used in infrared (IR) technology, for between $5.5m and $14.15m in cash, based on a multiple of up to 5.5x Galaxy’s 2010 earnings before interest, tax, depreciation and amortization (EBITDA). Galaxy’s unaudited 2009 accounts showed EBITDA of $0.8m on revenue of $3m, as well as pre-tax profit of $0.7m and net assets of $1.6m at end-2009. IQE says that the acquisition will immediately enhance its earnings.

IQE also expects to place (on 5 October) 65 million new ordinary shares on the London Stock Exchange’s AIM market at 32p each to raise £20.8m (gross) in order to: fund the acquisition, selectively expand IQE’s existing manufacturing capacity, repay about £10m of debt, and strengthen its balance sheet to position the group for accelerating future growth.  

Founded in 1999, Galaxy's key products are indium antimonide (InSb) and gallium antimonide (GaSb) substrates, for use in applications including thermal imaging cameras, forward-looking IR for navigation through darkness, IR homing missile guidance, detection of heat sources, magneto-resistance, biomedical imaging, and ultra-high-speed electronic circuits.

IQE says that the strategic acquisition complements its existing IR capabilities at its substrate manufacturing division Wafer Technology Ltd of Milton Keynes, UK, enables multi-site manufacturing, provides access to the large US market, and creates significant technology benefits. Consistent with its multi-site manufacturing strategy, IQE will be able to provide IR materials from independent manufacturing facilities at Spokane and Milton Keynes. Galaxy’s management and key technical personnel are being retained.

The firm also reckons that Galaxy positions IQE as a leading provider in the rapidly growing market for antimony-based IR substrates, with diverse applications in advanced imaging for both commercial and military applications. The acquisition forms part of the IQE’s strategy to be a global supplier of advanced optoelectronic materials, as well as adding additional intellectual property.   

“Galaxy provides IQE with new manufacturing capacity,  new products and significant new clients [including major US defence contractors and commercial customers in IR imaging],” comments IQE’s chief executive Dr Drew Nelson.   

Since IR materials form a rapidly growing segment of the optoelectronics sector, IQE’s directors believe that the acquisition of Galaxy will open up major opportunities in global imaging markets. IQE therefore intends to support Galaxy's expansion by providing $1m of capital expenditure in 2011.

See related items:

IQE revenue grows 54% year-on-year to record £33m in first-half 2010

See: IQE Company Profile

Search: IQE InSb substrates GaSb substrates IR



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