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22 December 2006


IQE acquires Singapore epiwafer foundry MBE Technology for £7.5m 

IQE plc of Cardiff, Wales, UK has agreed to acquire Singapore-based epiwafer foundry MBE Technology Pte Ltd for S$23m (£7.5m): half in a cash payment plus half in loan notes (bearing 6.5% interest) repayable in three instalments in January 2008, June 2008 and January 2009. To finance the cash payment plus working capital, IQE is raising about £4.5m (before expenses) through a placing of 25 million new ordinary shares at 18p per share (about 6% of the company's enlarged ordinary share capital), conditional on admission to trading on the London Stock Exchange’s AIM market (on which IQE’s existing shares trade) by 27 December. The acquisition will be immediately earnings enhancing, reckons IQE.

Following the acquisition of Emcore’s Electronic Materials Division (EMD) in Somerset, NJ, USA in August, MBE Technology completes IQE’s strategy to become the largest outsource supplier of epiwafers to chip manufacturers for the wireless industry, with the industry’s broadest range of products, says IQE’s chief executive Dr Drew Nelson.

MBE Technology was incorporated in Singapore 1993 and supplies epiwafers for high-speed electronic components in the wireless and optical telecoms industries. It is expected to generate full-year 2006 revenues of US$15m and earnings before interest, taxes, depreciation and amortization (EBITDA) of over US$ 3.2m. IQE says that MBE has a strong customer base across the Far East, including a strategic supplier agreement with a substantial Japanese electronics manufacturer and excellent links into Taiwan, China and Korea. The acquisition provides opportunities to use the new base in Asia to accelerate sales into existing and new customers in the Pacific Rim wireless industry, the company says.

IQE says it will now have a dual-source manufacturing capability for all its wireless products, with facilities in Singapore, the USA, and the UK qualified for the production of epiwafers for RF components. “This brings significant manufacturing synergies, allowing us to more fully leverage our global purchasing power [of raw materials] and excess manufacturing capacity at our facilities in the US [as demand, particularly from the Pacific Rim, continues to grow],” says Nelson.

According to Strategic Analytics, the amount of GaAs wafers used in mobile phones alone is expected to at least double between 2005 and 2009, driven by increasing mobile handset sales and consumer demand for increased functionality, higher-data-rate access, and more comprehensive interactive content, plus the addition of WiFi, WiMAX and wireless media.

“IQE is the only wafer company capable of supplying products for the full spectrum of the wireless market, from handset to infrastructure,” claims Nelson. “We can provide our customers with complete assurance of supply and a one-stop shop for all of their wafer requirements.” 

Following the acquisition, IQE will employ about 320 people and operate six manufacturing facilities in Cardiff (two) and Milton Keynes in the UK, in Bethlehem, Pennsylvania and Somerset, NJ in the USA, and in Singapore, as well as nine sales offices worldwide.

* In a trading update for full-year 2006, IQE says it has continued to perform well during second-half 2006 with the overall business performing in the line with the board’s expectations. Demand for its wafer products has continued to be strong across all sectors. The weak US dollar has had an impact on revenues, but the natural hedging derived from a significant proportion of group costs being in US dollars has reduced the impact on profitability.

The integration of the former EMD facility has been successful, with demand for wireless products in that business exceeding expectations. The ability to ‘multi-source’ wireless products from within the group is proving to be a major benefit, says IQE. It has also provided the opportunity to qualify new and existing customers with additional wireless products and to accelerate development of next-generation products such as BiFETs.

These developments have resulted in some additional costs during second-half 2006, but are expected to benefit the group significantly in 2007. IQE will report preliminary results for full-year 2006 in March 2007.

See related items:

IQE closes acquisition of EMD after raising £12m

Survey ranks Asia GaAs epi suppliers highest; Hitachi Cable overtakes FCM for substrates