News Article
Cree acquires Ruud Lighting for $525 million
The addition of Ruud’s BetaLED product line will strengthen Cree’s position in gallium nitride based LED lighting and components.
The combination of two highly complementary LED innovators, Cree and Ruud Lighting should extend increasing the adoption of energy-efficient LED lighting. The companies have a shared focus on best-in-class LED-based systems which has led to thousands of LED lighting installations over the past several years.
Other synergies include increased access to the lighting market through expanded sales channels and operating leverage from increased economies of scale. Through a broader presence in the lighting systems market, Cree will gain additional knowledge and expertise to develop the next generation of industry-leading, lighting-class LED components.
“Cree is taking another bold step in leading the LED lighting revolution, creating a company that has an unrivalled focus and commitment to driving LED lighting adoption,” said Chuck Swoboda, chairman and chief executive officer of Cree.
“Joining Cree was the right thing to do so Ruud Lighting can build on our leadership position; as leaders we create opportunities for everyone,” said Alan Ruud, chairman and chief executive officer of Ruud Lighting.
Ruud Lighting will continue to be based in Racine, Wisconsin, and will operate as a subsidiary as part of Cree’s lighting business. Additionally, Alan Ruud has joined the Cree board. Ruud Lighting, through its BetaLED product line, was one of the first traditional lighting companies to transform the majority of its business to LED-based systems.
Cree has acquired all of the outstanding stock of Ruud Lighting for an estimated net cost of approximately $525 million, comprised of $372 million in cash, $211 million in stock (valued at market closing price of $34.74/share), $85 million paid concurrently with the acquisition to retire outstanding debt, offset by tax benefits noted below.
The stock portion is comprised of 6,074,833 Cree shares. The acquisition was structured for tax purposes as a deemed asset purchase, which means the cost to Cree will be offset by approximately $143 million of expected future tax benefits related to the acquisition.
Ruud Lighting’s financial and operating results will be consolidated for the balance of Cree’s first quarter of fiscal 2012 and Cree is revising its targets for this quarter. These revised targets include approximately 40% of a full quarter’s results from Ruud Lighting. Cree now targets revenue in a range of $265 to $275 million with GAAP gross margin of approximately 37% to 38%.
GAAP operating expenses are now targeted to increase by approximately $13 million from the previous quarter to $88 million. The tax rate for the first quarter is now targeted at 21.5%. GAAP net income, which includes expenses related to the transaction, is targeted at $9 million to $12 million, or $0.08 to $0.11 per diluted share.
Cree targets this transaction to be slightly dilutive to GAAP earnings for the balance of fiscal 2012 and the GAAP earnings per share target is based on an estimated 112.9 million diluted shares outstanding.
Cree management is hosting a financial analyst and investor conference call on August 18, 2011 at 8:00 a.m. EDT. The call can be accessed from the U.S./Canada at (800) 374-1789 or outside the U.S./Canada at (973) 200-3386 with conference call ID 92095103 and is also available via webcast on Cree’s website at www.cree.com in the “Investor Relations/Financial Events and Presentations” section.
The call and the associated written materials will be archived and available on the website until midnight EDT on September 1, 2011.
