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12 March 2007


Cree acquiring LED maker COTCO for $200m to expand China market share

LED maker Cree Inc of Durham, NC, USA, which makes SiC- and GaN-based LED chips and packaged devices, has agreed to acquire privately held high-brightness LED lamp maker COTCO Luminant Device Ltd of Hong Kong. Cree will pay its parent company COTCO Holdings Ltd about $200m in stock and cash ($70m in cash and 7.6m shares of Cree stock, valued at $130m). Up to $125m extra, tied to the business achieving certain financial targets over the next two fiscal years, could take the deal to more than $320m. The transaction is expected to close by late March or April.

COTCO Holdings has also agreed that it can only sell or transfer half of the Cree shares it receives a year after the acquisition’s closing date, and the remaining half two years after. A COTCO Holdings subsidiary will also enter into a long-term supply agreement at closing that will require it to purchase a quarterly volume of LED lamp products, consistent with historical purchases, on competitive terms.

Cree says the acquisition will provide it with strategic access to the fast-growing Chinese solid-state lighting market. It will also provide a low-cost manufacturing platform, helping Cree to leverage its LED chip expertise and intellectual property, as well as its investment in sales and marketing, to offer more value-added products in key markets. As well as having a production base in China, COTCO Luminant Device is able to engineer and design high-performance LED products for applications including full-color video screens, information signs, traffic signals, automotive lighting and specialty lighting.

Cree reckons that the acquisition should increase its annual revenue by 15-20% over current estimates for fiscal 2008. “This acquisition is the next step in our strategy to enable the solid-state lighting revolution,” says chairman and CEO Chuck Swoboda. COTCO Luminant Device’s management team will join Cree. “We look forward to working together to expand our business in China and to transform Cree into a truly global company,” Swoboda adds.

The merger will provide COTCO Holdings with access to Cree’s technology and IP resources, strengthening its position in the solid-state lighting supply chain, says the firm’s chairman and founder Paul Lo.

* Previously, in July 2005, Cree had licensed COTCO subsidiary COTCO International to manufacture InGaN-based white LEDs under US patent 6,600,175, using Cree-supplied die and phosphor conversion technology.

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