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Analysts Endorse IQE Acquisition Plan

Two industry commentators urge IQE shareholders to endorse the UK company's proposed share offering, which will be needed for its buy-out of Emcore's electronic materials division.

Market and investment analysts are both urging IQE s shareholders to vote in favor of the company s plan to raise £12 million through a new share offering.

The capital is required in part to pay for the Cardiff, UK, firm s planned acquisition of Emcore s electronic materials division (EMD), and IQE is holding an extraordinary general meeting on August 15 at which shareholders will vote on the plan (see related story).

Andrew Bryant from Edison Investment Research, of which IQE is a client, said that the "highly complementary" EMD deal would consolidate IQE s position as the leading epi foundry to the wireless sector and significantly fast-track visibility of earnings and cashflow.

Bryant also believes that there is an accelerating trend towards epi process outsourcing among major compound semiconductor manufacturers. III-V market commentator Asif Anwar from Strategy Analytics agrees, saying: "Overall demand for epitaxial substrates will grow 40 per cent year-on-year in 2006 and 30 per cent in 2007."

Anwar added, "We believe that this is a positive move for IQE that will enable the company to increase its share of the commercial market for semi-insulating GaAs epiwafers, and move into profitability. [We] recommend that IQE shareholders pass the resolution."

Representatives from both IQE and EMD have told that the two companies are a "perfect fit", both in terms of their existing product portfolios and deposition techniques, as well as their current customer bases.

Bryant reports that the combined entity would offer six key processes, four more than any of its epi foundry rivals.

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