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Diodes Incorporated and Lite-On Semiconductor Corporation have entered into an agreement that provides for the acquisition of LSC by Diodes.
Highlights of the proposed transaction include:
- Combined trailing twelve months (“TTM”) reported revenue of approximately $1.5 billion and positive EBITDA of $333.1 million;
- Represents next significant step in executing Diodes’ strategic growth plan to achieve $2.5 billion in revenue by 2025;
- Broadens Diodes’ discrete and bipolar IC product offerings in Asia with a complementary product portfolio that will benefit from Diodes’ more extensive worldwide sales channel;
- Offers cost-effective wafer fab and product assembly manufacturing capacity, enabling internal sourcing flexibility;
- Favorable return on investment for LSC’s 31.2% ownership stake in On-Bright Electronics (TWSE: 4947);
- Accelerates repurchase of Diodes’ shares outstanding, recapturing LSC’s holding of 15.3% of DIOD shares as of June 30, 2019;
- Expected to result in financial synergies, including operational, manufacturing and administrative efficiencies; and
- Expected to be immediately accretive to Diodes’ GAAP earnings per share.
At the effective date of the transaction, each share of LSC stock will be converted into the right to receive TWD 42.50 in cash, or $1.37 USD, as of June 30, 2019 without interest. The aggregate consideration will be approximately $428 million. The price per share reflects a premium of 35% over LSC’s 30-day volume-weighted average price (VWAP). The boards of both companies have approved the transaction, which is still subject to approval by LSC shareholders as well as other customary closing conditions and regulatory approvals. The transaction is expected to close in April, 2020.
Commenting on the transaction, Dr. Keh-Shew Lu, President and Chief Executive Officer of Diodes, stated, “In combination with our strong organic growth, this proposed acquisition underscores Diodes’ use of acquisitions to accelerate the attainment of our next strategic goal of $2.5 billion in annual revenue and $1.0 billion in annual gross profit by 2025. This transaction will expand our discrete business in Asia, complementing our existing product lines with offerings at additional price points, especially for cost-sensitive applications. LSC’s contact image sensor business also extends Diodes’ footprint, representing a new market where Diodes can participate. Additionally, LSC’s wafer fabs and assembly sites provide Diodes with incremental manufacturing capacity as well as the opportunity for increased manufacturing flexibility and cross-regional internal dual-sourcing.”
Dr. Lu continued, “Further, this acquisition accelerates our share repurchase activities, recapturing over 15.3% of Diodes outstanding shares currently held by LSC. In addition, it provides a positive return on investment for LSC’s 31.2% ownership in On-Bright Electronics. The transaction also meets our criteria for strategic acquisitions and is expected to be immediately accretive to our earnings. We look forward to further leveraging Diodes’ strong manufacturing know-how to drive increased operational and cost efficiencies, while also improving utilization of LSC’s production facilities in Taiwan and China.”
Commenting on the proposed acquisition, David Lee, LSC President said, “We are pleased to have reached this agreement as Diodes offers us a significant opportunity to leverage their extensive sales channel, manufacturing strength and broad support infrastructure. We believe this transaction represents outstanding value for our shareholders, customers and employees alike, and we look forward to becoming a part of Diodes.”
Diodes expects to fund the purchase price of the acquisition primarily with proceeds from a new financing arrangement co-led by Bank of America, PNC Bank and Wells Fargo Securities. Advisors for the transaction included Jones Day, who served as legal counsel to Diodes and Lexcel Partners, legal counsel for LSC.
About Diodes Incorporated
Diodes Incorporated (Nasdaq: DIOD), a Standard and Poor’s SmallCap 600 and Russell 3000 Index company, is a leading global manufacturer and supplier of high-quality, application-specific standard products within the broad discrete, logic, analog and mixed-signal semiconductor markets. We serve the consumer electronics, computing, communications, industrial, and automotive markets. Our products include diodes, rectifiers, transistors, MOSFETs, protection devices, function-specific arrays, single gate logic, amplifiers and comparators, Hall-effect and temperature sensors, power management devices, including LED drivers, AC-DC converters and controllers, DC-DC switching and linear voltage regulators, and voltage references along with special function devices, such as USB power switches, load switches, voltage supervisors, and motor controllers. Diodes also has timing, connectivity, switching, and signal integrity solutions for high-speed signals. Our corporate headquarters and Americas’ sales offices are located in Plano, Texas and Milpitas, California. Design, marketing, and engineering centers are located in Plano; Milpitas; Taipei, Taoyuan City and Zhubei City, Taiwan; Oldham, England; and Neuhaus, Germany. Our wafer fabrication facilities are located in Oldham and Shanghai, China and Greenock, Scotland. We have assembly and test facilities located in Shanghai, Jinan and Chengdu, China, as well as in Hong Kong, Neuhaus and Taipei. Additional engineering, research and development, sales, warehouse, and logistics offices are located in Taipei; Hong Kong; Oldham; Shanghai; Shenzhen and Yangzhou, China; Seongnam-si, South Korea; Munich, Germany; and Tokyo, Japan, with support offices throughout the world.