Aug 09, 2001
Solectron will offer 1.755 shares for each outstanding common share of C-Mac. Based on Solectron's closing price of $17.20 on Wednesday, the deal is valued at $30.19 per C-Mac common share, or a 33 per cent premium over the Montreal-based company's Wednesday close in New York.
The total amounts to about $2.7-billion including the assumption of debt, Solectron said in a statement, not specifying the level of debt it was taking on.
Representatives from Solectron and C-Mac did not immediately return calls.
"C-Mac's systems-solutions expertise.... further strengthens our industry-leading technology, manufacturing and supply-chain services," said Koichi Nishimura, Solectron's chairman, president and chief executive officer in the statement.
"In addition, the transaction provides us with access to the automotive electronics industry, which we have specifically targeted for growth."
The deal boosts Solectron's presence in Canada. C-Mac has facilities in seven cities in Quebec, Manitoba and Ontario, while Solectron currently has facilities only in Calgary and in Vaughan, Ont.
Solectron's is the second major merger announcement in the contract electronics manufacturing sector in recent weeks.
Sanmina Corp. said last month it agreed to buy SCI Systems Inc. for about $3.9-billion in stock. The merged company would be better placed to win big contracts in the $100-billion-a-year business of outsourced electronics manufacturing.
Milpitas, California-based Solectron said it expects to generate about $60-million to $120-million in cost savings and revenue opportunities from the acquisition. It also said it expects the deal to add to its fiscal 2002 earnings.
Separately, Solectron said it foresees a fourth-quarter restructuring charge of as much as $210-million, in addition to a $50-million charge announced in June. It also expects a fourth-quarter one-time charge of about $58-million related to credit and other exposures.
Two C-Mac directors will join Solectron's board, including C-Mac Chairman and Chief Executive Dennis Wood. Wood will chair a board committee focused on corporate strategy, and will oversee integration of the two companies, Solectron said.
The boards of both Solectron and C-Mac have approved the transaction, which is expected to close by the end of 2001 pending shareholder and regulator approvals, Solectron said.
C-Mac is heavily exposed to the beleaguered telecommunications equipment sector, with its biggest customer struggling giant Nortel Networks Corp. Even so, the company so far has dodged the worst effects of the slump, reporting a 22 percent increase in second-quarter net profit.
C-Mac said on Thursday that order visibility from its customers in the telecoms market is still limited, while difficult economic conditions persist.
The company expects results for the second half to be about comparable to the first half. For the third quarter, it expects revenues to top $575-million (Canadian) and earnings before goodwill amortization per diluted share of about 10 cents to 15 cents.
Solectron forecast fiscal 2002 sales of $16-billion to $18.5-billion and cash earnings per share of 62 cents to 66 cents, including the planned C-Mac acquisition. That forecast excludes other acquisitions and is subject to changes in market conditions, Solectron said.
Analysts, on average, currently expect the company to earn 65 cents per share for fiscal 2002, according to tracking firm Thomson Financial/First Call.
Solectron reiterated expectations of fourth-quarter sales of $3-billion to $3.5-billion and cash EPS of 5 cents to 9 cents, before restructuring charges and one-time charges. Analysts currently call for Solectron to earn 6 cents per share for the quarter, according to First Call.
