1st Sep 2008 07:00
1 September 2008
e2v technologies plc
Proposed acquisition of QP Semiconductor, Inc.
e2v technologies plc, (`e2v', the `Company' or the `Group') the specialist developer and manufacturer of high technology components and sub-systems, announces that its subsidiary, e2v Holdings, Inc., has conditionally agreed to buy QP Semiconductor, Inc. (`QP') for an initial cash consideration of US$65m.
In addition, deferred consideration of up to US$15m may be payable to QP shareholders, subject to future operating profit performance targets being achieved by QP. e2v may satisfy up to US$5m of the deferred consideration through the issue of new ordinary shares to the QP shareholders. All other deferred consideration is to be issued in cash. The overall cash consideration will be funded through existing bank facilities.
QP is a well established and leading US-based designer and supplier of specialty semiconductor components used in military and aerospace applications. Its extensive product range addresses a niche sector within this market, designed to deliver high performance in extreme conditions.
Highlights:
QP will strengthen the Group's market position in high reliability specialist semiconductors as well as expand e2v's business from this niche sector by c. 40%
QP achieved compound annual sales growth of 27% from 2005 - 2007, with 2007 operating margins of 35%
The enlarged Group will benefit from the ability to better service complementary global markets
Establishes a US manufacturing base servicing the aerospace and defence sector
Interest cover and net debt/EBITDA on acquisition anticipated to return to March 2008 levels within an acceptable time frame
Earnings enhancing in the financial year ending March 2009 and materially earnings enhancing in the year ending March 2010*
* This statement is not intended to constitute a profit forecast for the year ending 31 March 2009, for the year ending 31 March 2010, or for any other period. Nor should this statement be interpreted to mean that earnings per share will necessarily be greater or less than those for the relevant preceding financial period for e2v. Rather, this statement should be construed as a reference to an enhancement above the earnings (before amortisation of bought-in intangibles) that might have been earned during the relevant financial period.
Completion of the acquisition is conditional on the approval of e2v's shareholders, which will be sought at a General Meeting to be held on 18 September 2008. Completion is also conditional on the receipt of certain other regulatory approvals and is expected to take place on 30 September 2008. A circular will shortly be posted to shareholders.
Keith Attwood, Chief Executive said:
``We are delighted to announce the proposed acquisition of QP, which represents a significant opportunity for the Group and is an important step in establishing an operational footprint in the USA. It will increase our market share in the aerospace and defence sector and expand our relationship with contractors to the US Department of Defense.''
``This acquisition will significantly enhance our presence in the high reliability specialist semiconductor market and the board believes that the acquisition of QP will deliver earnings enhancement in the financial year ending March 2009 and material enhancement in the year ending March 2010.''
A conference call for analysts and investors will be hosted today by Keith Attwood and Group Finance Director Mike Hannant at 9:30am.
Dial-in number: +44 (0) 1452 569 393.
Call reference: 62754076
A replay service will be available until 5 September 2008:
Dial in number: +44 (0) 1452 550 000
Pin number: 62754076
Further enquiries:
|
e2v technologies plc |
||
|
Keith Attwood, Chief Executive Mike Hannant, Group Finance Director |
Tel: 01245 493 493 |
|
|
Website: www.e2v.com |
||
|
N M Rothschild & Sons Limited |
||
|
Roger Hemming / John Byrne |
Tel: 0121 600 5252 |
|
|
RBS Hoare Govett |
||
|
Bob Pringle / Jonathan Retter |
Tel: 020 7678 8000 |
|
|
Financial Dynamics |
||
|
Jon Simmons / Sophie Kernon |
Tel: 020 7269 7291 |
Background to and reasons for the acquisition
e2v's business strategy is built upon four key principles:
To focus its resources on high growth and high margin product opportunities in current and adjacent niche market sectors;
To extend its scope of supply, where appropriate, thereby maximising revenues from established market positions as well as developing new market positions;
To continue its internal focus on productivity improvements; and
To acquire complementary businesses and technologies to accelerate growth.
QP - Business Overview
Incorporated in 1985 and owned by four employee shareholders, QP is located in Santa Clara, California and employs over 90 people. e2v's directors believe that the acquisition represents an opportunity for e2v to strengthen its position as a major global provider of specialised electronic components and sub-systems to leading original equipment manufacturers (`OEMs').
QP was admitted to the Defense Supply Center Columbus (`DSCC') qualified manufacturers list in 1998 and supplies over 3,000 qualified semiconductor components on the US DSCC qualified manufacturing list. Its products include militarised microcontrollers and interface devices, memory components and linear and mixed signal devices.
QP generates revenue from three principal sources:
Sales of semiconductor microcircuits manufactured from wafers and dies purchased from other semiconductor companies exiting the market;
Redesigned functional equivalents of discontinued and second-sourced semiconductor products; and
Assembly, packaging, qualification and testing services
QP produced an operating margin of 35% in 2007 as well as compound annual sales growth of 27% between 2005-2007.
|
QP Financial Information Year ended 30 September |
2007 US$m |
2006 US$m |
2005 US$m |
|
Revenue |
24.0 |
17.4 |
14.9 |
|
Operating profit |
8.4 |
4.2 |
2.8 |
|
Profit before tax |
8.3 |
4.2 |
2.8 |
|
Gross assets |
16.1 |
9.7 |
7.2 |
There is no requirement in the USA for smaller private businesses to be subject to an annual audit and due to the limitations in the scope of their work, e2v's reporting accountants were unable to express an opinion on the financial statements for either 2006 or 2005. However, e2v's reporting accountants opinion is that the 2007 balance sheet and results give a true and fair view of the state of affairs of QP, except for the financial effects of any adjustments that might have been necessary had they been able to conclude on the value of inventory at 30 September 2006 and cost of sales for 2007.
Since 30 September 2007, QP has continued to trade strongly and unaudited management accounts show that sales in the nine months to 30 June 2008 were materially above sales in the same period during the prior year. QP management believes that the prospects and outlook for the current year and medium-term are positive.
Management
New employment contracts have been agreed with QP's co-founders John Stannard and Gary Voget who will remain with the business during the course of the earn-out and the leadership succession plan is well progressed. Other key management and staff will transfer to e2v under their existing employment terms including Jim Townsend, QP's Director of Marketing. There will be no changes to the Board of e2v following the acquisition. A new Chief Financial Officer of QP has been appointed to accommodate the plc reporting requirements.
About e2v
e2v's products are supplied primarily to OEMs in niche markets within the medical and science, the aerospace and defence and the commercial and industrial markets.
The Company is headquartered in the United Kingdom and operates from five production facilities: three in the UK (Chelmsford, Lincoln and High Wycombe), one in Grenoble, France, and one in Corcelles, Switzerland, as well as a purchasing office based in Taiwan. Additionally, e2v operates sales and technical support offices in the UK, North America, France, Germany and Hong Kong, as well as a global network of distributors and resellers.
In the financial year ended 31 March 2008, e2v generated an operating profit of £19.4m on turnover
of £204.6m. Adjusted Profit Before Tax amounted to £24.2m. The net assets of e2v as at 31 March 2008 were £74.5m and gross assets were £243.2m.
e2v's results for the first half are expected to show solid progress and the outcome for the full year is anticipated to be in line with the Board's expectations. The directors believe the enlarged Group is well positioned and are confident as to the enlarged Group's prospects for e2v's current financial year.
Related Shares:
E2V.L