Cree has announced the execution of a definitive agreement to sell their Wolfspeed Power and RF division (“Wolfspeed”), which includes the silicon carbide substrate business for power, RF and gemstone applications, to Infineon Technologies for $850 million in cash.
In 2015, Cree announced their strategy to become a more focused LED lighting company. As part of this strategy, they also announced the proposed Spinoff and IPO of Wolfspeed to create a more focused Power and RF management team for which they raised capital to fuel Wolfspeed’s growth and unlock value for their shareholders.
Subsequent to that announcement, they were approached by several parties interested in acquiring the business directly. After evaluating the strategic options, they concluded that selling Wolfspeed to Infineon would be the best decision for their shareholders, employees and customers.
Chuck Swoboda, the chairman and CEO of Cree said - “Selling Wolfspeed to Infineon speeds our transition to a more focused LED lighting company while providing significant resources to accelerate our growth. Divesting Wolfspeed is targeted to reduce short-term profits, but increase free cash flow. We believe this is the right decision for the company, as it unlocks value, increases management focus on the core business and supports our mission to build a more valuable LED lighting technology company. We target using the capital raised, combined with improved free cash flow, to fund select M&A, as well as to support additional stock buybacks.”
The business to be acquired by Infineon generated pro-forma revenue of $173 million in the last twelve months ending March 27, 2016. Both Cree's Board of Directors and Infineon’s Supervisory Board have approved the transaction. J.P. Morgan Securities LLC served as the company’s financial adviser on the transaction. The closing of this transaction is expected by the end of calendar year 2016, and is subject to customary closing conditions and regulatory approvals, including HSR and CFIUS clearance. They target approximately $585 million of net proceeds after tax and other deal related costs.
