19 October 2020
Cree selling LED business to SMART for up to $300m
Cree Inc of Durham, NC, USA has agreed to sell its LED Products business unit (Cree LED) to SMART Global Holdings Inc for up to $300m, including fixed upfront and deferred payments and contingent consideration.
Under the terms of the agreement, which has been approved by the Cree’s board of directors, the firm expects to receive an initial cash payment of $50m upon closing and $125m to be paid upon maturity of a seller note issued by SMART to Cree due August 2023. Cree also has the potential to receive an earn-out payment of up to $125m based on the revenue and gross profit performance of Cree LED in the first full four quarters after the transaction’s completion, also payable in the form of a three-year seller note.
The agreement to sell the LED Products business unit follows Cree’s sale in May 2019 of its Lighting Products business unit (Cree Lighting, including the LED lighting fixtures, lamps and corporate lighting solutions business for commercial, industrial and consumer applications) to Ideal Industries Inc of Sycamore, IL, USA.
Cree’s LED product families include blue and green LED chips, high-brightness LEDs and lighting-class power LEDs targeted for indoor and outdoor lighting, video displays, transportation and specialty lighting applications.
Having specialized in specialty memory, storage and high-performance computing solutions serving the electronics industry for over 30 years, SMART reckons that Cree LED will be able to leverage its diverse customer base and global operations.
“As the leader in LED lighting technology with a highly respected brand and expansive patent portfolio, Cree has a track record of delivering best-in-class solutions,” comments SMART Global Holdings’ president & CEO Mark Adams.
Cree’s sale of its LED Products business unit represents “another key milestone in our transformational journey to create a pure-play global semiconductor powerhouse,” says Cree’s CEO Gregg Lowe. Cree will now focus on its Wolfspeed silicon carbide materials and silicon carbide (SiC) power device & gallium nitride (GaN) RF device business. Wolfspeed product families include silicon carbide materials, power-switching devices and RF devices targeted at applications such as electric vehicles (EVs), fast-charging inverters, power supplies, telecom and military and aerospace.
“This transaction uniquely positions us with a sharpened strategic focus to lead the industry transition from silicon to silicon carbide and further strengthens our financial position, which will support continued investments to capitalize on multi-decade growth opportunities across EV, 5G and industrial applications,” says Lowe. “SMART has a strong platform and a solid track record of successfully acquiring and integrating technology businesses,” he comments.
The transaction is subject to required regulatory approvals and satisfaction of customary closing conditions, and is targeted to close in first-quarter 2021. SMART will subsequently license and incorporate the Cree LED brand name into the SMART portfolio of businesses.
In connection with the transaction, Morgan Stanley & Co LLC is acting as financial advisor and Smith Anderson is acting as legal advisor to Cree.