February 29, 2008 / 2:18 PM / 9 years ago

UPDATE 2-Zarlink sells money-losing foundry for 1 euro

2 Min Read

(Adds deal price, stock. Figures in U.S. dollars unless noted)

OTTAWA, Feb 29 (Reuters) - Canadian chip maker Zarlink Semiconductor Inc ZL.TO said on Friday that it has sold its money-losing analog foundry in the United Kingdom to a MHS Industries Group subsidiary for 1 euro.

Zarlink said it expects to record a book loss of about $13 million, or 10 cents per share, as a result of the sale. It also lowered its fourth-quarter forecast to a loss of between 16 cents and 18 cents per share from a loss of between 6 cents and 8 cents per share.

Due to the timing of the deal closing, Zarlink is maintaining its fourth-quarter revenue guidance of between $53 million and $56 million.

The company said it has paid MHS Electronics 2 million euro for restructuring under the deal, which will be accretive to Zarlink's fiscal 2009 earnings by about 5 cents per share. The earnings gain largely reflects the elimination of foundry losses in 2008, Zarlink said.

Under the arrangement, Ottawa-based Zarlink will transfer all assets including equipment, about 120 staff, and inventory to MHS Electronics, but exclude cash on hand and accounts payable and receivable.

Under a three-year agreement to ensure continued wafer supply, Zarlink will deposit $3.9 million for about nine months of product orders.

Shares in Zarlink added 4.6 percent, or 4 Canadian cents, to 91 Canadian cents on the Toronto Stock Exchange after the news. So far this year, the stock has gained about 15 percent.

$1=$0.98 Canadian Reporting by Susan Taylor; Editing by Renato Andrade

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