[Breaking News] Cree Sells Wolfspeed for $850M to Infineon

Cree, a market leader in LED lighting, today announced execution of a definitive agreement to sell its Wolfspeed Power and RF division (“Wolfspeed”), which includes the silicon carbide substrate business for power, RF and gemstone applications, to Infineon Technologies AG for $850 million in cash. 

In 2015, the Company announced its strategy to become a more focused LED lighting company.  As part of that strategy, the Company also announced the proposed IPO of Wolfspeed to create a more focused Power and RF management team, raise capital to fuel Wolfspeed’s growth and unlock value for Cree shareholders. 

Subsequent to that announcement, the Company was approached by several parties interested in acquiring the business directly.  After evaluating the strategic options, the Company concluded that selling Wolfspeed to Infineon is the best decision for our shareholders, employees and customers.

“Selling Wolfspeed to Infineon speeds our transition to a more focused LED lighting company while providing significant resources to accelerate our growth,” stated Chuck Swoboda, Cree chairman and CEO. “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 the 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.  The Company targets approximately $585 million of net proceeds after tax and other deal related costs. 

*Attached as an exhibit to this press release is a reconciliation schedule comparing Cree’s historical segment information presentation to the pro-forma segment information for revenue, gross profit and gross margin for the segments reclassified to reflect the assets to be sold as part of the Wolfspeed business.  These assets include certain assets formerly part of the LED Product segment relating to the silicon carbide substrate business for power, RF and gemstone applications described above.

FY16 Q4 Business Update

Commercial lighting gained momentum in Q4, as orders increased, customer service improved significantly and nine new products or significant upgrades were released.  LED Products also executed well, delivering solid quarter over quarter revenue growth.

Preliminary revenue results for Q4 were at the upper end of the Company’s target range at approximately $388 million.

  • Lighting Products revenue was in line with the expectations for this segment in the Company’s previously announced revenue targets at approximately $197 million.

  • LED Products revenue was higher than the expectations for this segment in the Company’s previously announced revenue targets at approximately $160 million due in part to the benefit of licensing revenue.

  • Wolfspeed revenue was in line with the expectations for this segment in the Company’s previously announced revenue targets at approximately $31 million.

The Company will provide a complete review of Q4 results and FY17 Q1 outlook on its regularly scheduled financial results call on August 16th at 5:00 p.m. EDT.

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