Mergers News

Flextronics to buy Solectron for $3.6 billion

NEW YORK (Reuters) - Contract electronics maker Flextronics International Ltd. FLEX.O said on Monday that it would acquire rival Solectron Corp. SLR.N for $3.6 billion in cash and stock.

Under the deal, each Solectron share will be converted into the right to receive either 0.3450 Flextronics share or $3.89 cash, subject to certain conditions, Flextronics said.

The cash consideration represents a premium of 15 percent over Solectron’s closing price on Friday, while the stock consideration represents a premium of about 20 percent.

Solectron shares traded at $3.83 in light pre-open trade on Monday, up from a Friday close at $3.37 on the New York Stock Exchange. Flextronics shares closed at $11.07 on the NYSE on Friday.

Following the acquisition, Solectron will become a wholly-owned unit of Flextronics, and Solectron shareholders will own 20 percent to 26 percent of Flextronics’ outstanding shares.

The combined company will have a work force of about 200,000, including about 4,000 design engineers. Their combined annual revenue will exceed $30 billion.

Flextronics said the combined entity could cut costs by up to $200 million, although it could take as much as 24 months to integrate the companies.

“This should be at least 15 percent accretive to Flextronics’ earnings per share once all of the synergies are realized,” Thomas Smach, chief financial officer of Flextronics, said in a statement.

As part of the acquisition agreement, Solectron has the right to nominate two individuals, approved by Flextronics, to the board of directors of the combined company.