Kulicke & Soffa Announces Agreements to Acquire Orthodyne Electronics and Divest...

Thu Jul 31, 2008 4:01pm EDT

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Kulicke & Soffa Announces Agreements to Acquire Orthodyne Electronics and Divest the K&S Wire Business Unit

   Transactions Enhance the Company's Position as a Leading Supplier
                       of Interconnect Solutions
FORT WASHINGTON, Pa.--(Business Wire)--
Kulicke & Soffa Industries, Inc. (NASDAQ:KLIC) ("K&S") today
announced that the company has entered into definitive agreements to
acquire substantially all of the assets of Orthodyne Electronics
Corporation ("Orthodyne"), a leading supplier of wedge bonders, and
sell the K&S wire business unit to W.C. Heraeus GmbH ("Heraeus"), a
precious metals and technology group that has a leading position in
its markets.

   Orthodyne Acquisition

   Under the terms of the Orthodyne agreement, K&S will fund the
acquisition of Orthodyne with approximately 7.1 million shares of K&S
common stock, plus $80 million in cash. If the transaction is not
consummated by October 31, 2008, the purchase price will be
approximately 19.6 million shares of K&S common stock and no cash. The
deal includes possible earn-out consideration up to an additional $40
million in cash if certain financial objectives are met by Orthodyne
over the next three years. The closing of the transaction, which is
expected within approximately 60 days, is subject to certain working
capital adjustments and closing conditions, including regulatory
approvals.

   "The acquisition of Orthodyne is in line with our stated strategy
and positions K&S to capitalize on our strengths in equipment
manufacturing and further cement our position as the leading supplier
of interconnect solutions," commented Scott Kulicke, Chairman and
Chief Executive Officer of K&S. "Orthodyne is a fast growing,
profitable market leader and provides us with deeper penetration into
the discrete side of the semiconductor market, particularly in the
attractive power management and hybrid module markets."

   Orthodyne, a privately held company based in Irvine, CA, is the
leading supplier of both wedge bonders and wedges for the power
management and hybrid module markets. Orthodyne's focus on the fast
growing power management market has delivered a double-digit compound
annual revenue growth rate over the last five years, resulting in 2007
revenues of $110 million. Orthodyne's executive team, led by Gregg
Kelly, will be retained, as will all 280 employees.

   The Wire Business Unit Divestiture

   Under the terms of the wire business agreement, Heraeus will pay
$155 million in cash to K&S for its wire business unit, subject to
certain working capital adjustments. K&S and Heraeus will also enter
into a strategic technical collaboration agreement that provides
reciprocal access to research and development expertise to exploit the
technical synergies that come from approaching the wire bond process
as a system involving the bonder, the tools and the wire. The closing
of the transaction, which is expected within approximately 60 days, is
subject to certain closing conditions, including regulatory approvals.

   Mr. Kulicke commented, "The wire business is one we believe
strongly in, especially with exciting new wire products such as
MaxSoft. It is a very healthy business, with excellent customer
relationships, and it will be a very solid asset for Heraeus. However,
the working capital requirements of this business have become
significant and, as a result, no longer make financial sense for us.
Heraeus is ideally positioned to support the continued growth and
exploit the advanced wire products we have developed in this business
by leveraging its significantly larger balance sheet. The wire
business fits very well into the core competencies of Heraeus, which
deal with precious metals and all related services such as refining
and trading worldwide. One of the key considerations in selecting a
buyer from what was a robust bidding process was the ability to
develop a long-term strategic alliance with a partner we knew well and
respected. We are excited by the technology alliance we have formed
with Heraeus, which will allow us to exploit the technical synergies
that exist between these two businesses."

   "W. C. Heraeus intends to continue building on its market position
and strengthen its presence in Asia and North America," noted Dr.
Peter Kohler, Managing Director of W. C. Heraeus, the largest business
segment of the Heraeus Group. "The acquisition of the K&S wire
business unit and its production facilities in Singapore and
Switzerland will strengthen our market position, especially in Asia,
which is the focal point of the world's semiconductor industry and a
strategically important site in close proximity to customers."

   Financial Details

   In order to illustrate the potential financial impact of each of
these transactions, we have provided the following table of K&S's
fiscal 2007 results assuming the inclusion of Orthodyne's results and
the divestiture of the wire business.

-0-
*T

Fiscal 2007 Results (000's)  Net Revenue    Gross Profit  Gross Margin
----------------------------------------------------------------------
K&S As Reported                   $700,404       $180,934    25.8%
----------------------------------------------------------------------
K&S Without Wire and With
 Orthodyne                        $480,949       $220,747    45.9%
----------------------------------------------------------------------
*T

   "These transactions would have significantly improved our gross
profit, both in absolute terms and as a percentage of sales,"
commented Maurice Carson, Chief Financial Officer of K&S. "Orthodyne
is a profitable and growing business. Additionally, the divestiture of
our wire business would have significantly reduced the working capital
needs of the company and improved cash flow."

   Mr. Kulicke concluded, "These transactions demonstrate our
commitment to find and drive profitable growth and strengthen our
balance sheet. Coupled with last year's acquisition of Alphasem, K&S
will posses a core competency across a full suite of interconnect
technologies for a variety of micro-electronic applications, providing
even greater value to our now broader base of customers. K&S will also
serve a larger Total Available Market for back-end assembly equipment,
providing more growth opportunities as the industry's cycle begins to
turn up in the future."

   Conference Call Details

   A conference call to discuss these transactions will be held on
August 1, 2008, beginning at 9:00 AM EDT. Interested participants may
call 877-407-8037 or internationally 201-689-8037 for the
teleconference or log on to http://www.kns.com/investors/events for
listen-only mode. A replay will be available approximately one hour
after the completion of the call by calling toll free 877-660-6853 or
internationally 201-612-7415 and using the following replay access
codes 5521 (account number) and 292381 (replay ID number). A replay
will also be available on the K&S Web site at
http://www.kns.com/investors/events. The replay will be available via
phone and Web site through September 1, 2008.

   About Orthodyne Electronics

   Orthodyne Electronics is the leading supplier of ultrasonic wedge
bonders and their associated tools. These products are used in fine
wire, heavy wire, and large ribbon applications, including power
semiconductors and power hybrids, which are enablers of energy
efficient solutions in products ranging from consumer white goods to
industrial electronics to hybrid electric vehicles. Orthodyne designs
and builds its products at its headquarters in Irvine, CA and supports
its customers through its sales and service network in North America,
Europe and Asia. Orthodyne has achieved a double-digit compound annual
revenue growth rate over the last five years, resulting in 2007
revenues of $110 million.

   About Heraeus Group

   Heraeus, the precious metals and technology group headquartered in
Hanau, Germany, is a global, private company with over 155 years of
tradition. The businesses include precious metals, sensors, dental and
medical products, quartz glass and specialty lighting sources. With
product revenues of EUR 3 billion and precious metal trading revenues
of EUR 9 billion, as well as over 11,000 employees in more than 100
companies worldwide, Heraeus holds a leading position in its global
markets.

   W. C. Heraeus GmbH, a subsidiary, processes the precious metals
and special metals primarily into industrial products for the
automotive, semiconductor, electronics and medical products industry
and commands a leading position in international precious metals
trading. The Contact Materials Division of W. C. Heraeus develops,
manufactures and distributes bonding wire for connecting discrete and
integrated components in the semiconductor industry.

   About Kulicke & Soffa

   Kulicke & Soffa (NASDAQ:KLIC) is the world's leading supplier of
semiconductor assembly equipment, materials, and technology. K&S
provides wire bonders, capillaries, wire, die bonders, and die collets
for all types of semiconductor packages using wire as the internal
electrical interconnections. K&S is the only major supplier to the
semiconductor assembly industry that provides customers with
semiconductor assembly equipment along with the complementing
packaging materials and process technology that enable our customers
to achieve the highest possible yields and throughput. The ability to
provide these assembly related products is unique to Kulicke & Soffa,
and allows us to develop system solutions to the new technology
challenges inherent in assembling and packaging next-generation
semiconductor devices. Kulicke & Soffa's web site address is
http://www.kns.com.

   Caution Concerning Forward Looking Statements

   In addition to historical statements, this press release contains
statements relating to future events and our future results. These
statements are "forward-looking" statements within the meaning of the
Private Securities Litigation Reform Act of 1995, and include, but are
not limited to, statements that relate to potential financial impact
of the Orthodyne and Heraeus transactions, including the impact of the
Orthodyne and Heraeus transactions on our gross profits and gross
margins, the expected closing dates for the Orthodyne and Heraeus
transactions, the growth rates of the power management market, the
growth of Orthodyne generally, our future growth opportunities,
revenue, revenue growth, sales, profitability, profitable growth,
financial results, strength of our balance sheet, and product
development. While these forward-looking statements represent our
judgments and future expectations concerning our business, a number of
risks, uncertainties and other important factors could cause actual
developments and results to differ materially from our expectations.
These factors include, but are not limited to: the risk of failure to
successfully manage our operations; the risk that anticipated orders
may not materialize or that orders received may be postponed or
canceled, generally without charges; the volatility in the demand for
semiconductors and our products and services; the risk that we may not
be able to develop and manufacture new products and product
enhancements on a timely and cost effective basis; the risk that the
Orthodyne and Heraeus transactions may not be completed or completed
on the terms agreed to as of the date of this press release; acts of
terrorism and violence; overall global economic conditions; risks,
such as changes in trade regulations, currency fluctuations, political
instability and war, associated with a substantial foreign customer
and supplier base and substantial foreign manufacturing operations;
potential instability in foreign capital markets; and the factors
listed or discussed in Kulicke and Soffa Industries, Inc. 2007 Annual
Report on Form 10-K and our other filings with the Securities and
Exchange Commission. Kulicke & Soffa Industries is under no obligation
to (and expressly disclaims any obligation to) update or alter its
forward-looking statements whether as a result of new information,
future events or otherwise.

Kulicke & Soffa Industries, Inc.
Investor Contact:
FD Ashton Partners
Geoff Grande, CFA
617-747-1721
Fax: 617-747-1711
geoff.grande@fdashtonpartners.com
or
Media Contacts:
FD Ashton Partners
Stephanie Brown, 312-553-6727
Fax: 312-553-6740
stephanie.brown@fdashtonpartners.com
or
Michael Geczi, 312-553-6735
Cell: 312-519-4920
Fax: 312-553-6740
michael.geczi@fdashtonpartners.com

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