Diodes Incorporated and Lite-On Semiconductor Corporation (LSC) have entered into an agreement that provides for the acquisition of LSC by Diodes. Highlights of the proposed transaction include:
- Combined trailing twelve months ("TTM") reported revenue of approximately $1.5 billion and positive EBITDA of $333.1 million;
- Represents next significant step in executing Diodes' strategic growth plan to achieve $2.5 billion in revenue by 2025;
- Broadens Diodes' discrete and bipolar IC product offerings in Asia with a complementary product portfolio that will benefit from Diodes' more extensive worldwide sales channel;
- Offers cost-effective wafer fab and product assembly manufacturing capacity, enabling internal sourcing flexibility;
- Favorable return on investment for LSC's 31.2% ownership stake in On-Bright Electronics;
- Accelerates repurchase of Diodes' shares outstanding, recapturing LSC's holding of 15.3% of DIOD shares as of June 30, 2019;
- Expected to result in financial synergies, including operational, manufacturing and administrative efficiencies; and
- Expected to be immediately accretive to Diodes' GAAP earnings per share.
At the effective date of the transaction, each share of LSC stock will be converted into the right to receive TWD 42.50 in cash, or $1.37 USD, as of June 30, 2019 without interest. The aggregate consideration will be approximately $428 million. The price per share reflects a premium of 35% over LSC's 30-day volume-weighted average price (VWAP).
The boards of both companies have approved the transaction, which is still subject to approval by LSC shareholders as well as other customary closing conditions and regulatory approvals. The transaction is expected to close in April, 2020.
Commenting on the transaction, Dr. Keh-Shew Lu, President and Chief Executive Officer of Diodes, stated, "In combination with our strong organic growth, this proposed acquisition underscores Diodes' use of acquisitions to accelerate the attainment of our next strategic goal of $2.5 billion in annual revenue and $1.0 billion in annual gross profit by 2025. This transaction will expand our discrete business in Asia, complementing our existing product lines with offerings at additional price points, especially for cost-sensitive applications. LSC's contact image sensor business also extends Diodes' footprint, representing a new market where Diodes can participate. Additionally, LSC's wafer fabs and assembly sites provide Diodes with incremental manufacturing capacity as well as the opportunity for increased manufacturing flexibility and cross-regional internal dual-sourcing."
Dr. Lu continued, "Further, this acquisition accelerates our share repurchase activities, recapturing over 15.3% of Diodes outstanding shares currently held by LSC. In addition, it provides a positive return on investment for LSC's 31.2% ownership in On-Bright Electronics. The transaction also meets our criteria for strategic acquisitions and is expected to be immediately accretive to our earnings. We look forward to further leveraging Diodes' strong manufacturing know-how to drive increased operational and cost efficiencies, while also improving utilization of LSC's production facilities in Taiwan and China."
Commenting on the proposed acquisition, David Lee, LSC President said, "We are pleased to have reached this agreement as Diodes offers us a significant opportunity to leverage their extensive sales channel, manufacturing strength and broad support infrastructure. We believe this transaction represents outstanding value for our shareholders, customers and employees alike, and we look forward to becoming a part of Diodes."
Diodes expects to fund the purchase price of the acquisition primarily with proceeds from a new financing arrangement co-led by Bank of America, PNC Bank and Wells Fargo Securities. Advisors for the transaction included Jones Day, who served as legal counsel to Diodes and Lexcel Partners, legal counsel for LSC.